Govt against cess on diesel cars in NCR

THE Centre on Monday pleaded against the Supreme Court's move to impose a green cess on diesel vehicles above 2,000 cc engine capacity before lifting a ban on them in the national capital region (NCR), saying that these vehicles are already highly taxed and “diesel cannot be isolated to be a bad fuel with dangerous emissions”. Stating that its commitment to pollution control is as firm as the court's, the government said a policy to replace 28 million old (10year-plus) vehicles by April 2017 was being rolled out at a huge cost to the exchequer.

While the bench indicated its willingness to lift the ban on registration of big diesel cars in NCR if car companies bore a 1% impost on the cost of each vehicle, advocate Aparijitha Singh, assisting the court as amicus curiae in the case, suggested that the cess amount should be 20%.

The argument was that 1% was “too little an amount” for the person buying a luxury vehicle for Rs 50 lakh and above. The court then reserved the order.

In its affidavit, the ministry of heavy industries cited Article 265 of the Constitution to argue that a green cess for diesel cars above 2,000cc “will not be in consonance with constitutional scheme of things.” “...such cess must be imposed by the authority of Parliament,” the ministry said. Attorney general Mukul Rohatgi, however, said that although the apex court has the power to impose any cess or tax on diesel cars, it should be left to the gover nment to decide the amount. “It's not appropriate for the court to impose cess. You can direct the (Centre) to take a relook and come back with the suggestions/figures,” Rohatgi told a bench headed by Chief Justice TS Thakur.

The government noted the ban has adversely impacted the “Make in India” initiative and FDI flows into the automobile industry. The share of diesel vehicles in new sales volumes by auto companies declined to 38% in April-June 2016, from 44% in the last financial year.

The ministry's affidavit, which included a table on how diesel, petrol and CNG cars emit various pollutants to contend that “diesel is not the evil”, also argued that the policy for voluntary replacement of old vehicles, irrespective of the fuel, would help a lot.

“This scheme will potentially replace about 28 million vehicles which were registered before March 31, 2005, with new BS-IV compliant vehicles which will be rolled,” the AG said, adding that under the scheme, any consumer can get Rs 50,000 to Rs 1 lakh for such cars. The scheme will cost the gover nment a lot, the AG added.

Vehicles that are more than 10 year old contribute 15% of the total fleet on the road but pollute 1012 times more than a new vehicle, the government noted, seeking six weeks to conduct a multipronged study on diesel vehicles’ effect on environment and possibility of imposition of green cess.

The industry welcomed the gover nment's move. “The gover nment's proposed policy to motivate people through graded incentives to scrap older vehicles will be a landmark executive decision which will bring in many positive outcomes,” said Rakesh Srivastava, senior vice-president, marketing and sales, Hyundai Motor India.

Supporting car manufacturers' plea for relaxing the ban on the sale of 2,000 cc-plus cars in NCR, the AG said a review of data from testing of vehicles at the government notified test agency Automotive Research Association of India (ARAI) revealed that there are vehicles which have higher engine capacities but emit much less than those with lower engine capacity.

Asking the Supreme Court to recall a part of the December 16 order and allow registration of its diesel vehicles with engine capacities over 2,000 cc in the national capital, two car manufacturers hit hard by the ban — MercedesBenz India and Toyota — came together and told the court that they are willing to deposit 1% of ex-showroom price of all cars registered in NCR as environment cess in an escrow account with a competent authority decided by the court.

Senior counsel Gopal Subramanium told the court that thought Mercedes Benz maintains the highest emission standards, it is still ready to deposit 1% of the cost of car registered in NCR to “prove its bona fide” as it has been “crippled” by the December 16 order. Other cars like BMW, Audi, etc, having engine capacities slightly lower than 2,000 cc are being registered, thus affecting Mercedes Benz’s sales.