Green Tax on old vehicles

On January 25, 2021, Union Transport Minister Nitin Gadkari announced the approval of a ‘green tax’ on vehicles of specified vintage, as a means of dissuading people from using polluting vehicles. There will be a 10%-25% additional green tax on the road tax payable by commercial transport vehicles that are older than eight years and for personal vehicles after 15 years. The policy is scheduled to come into force on April 1, 2022.

The policy includes:

• exemptions for tractors, harvesters and tillers used in farms 
• exemptions for vehicles powered by hybrid, electric, ethanol, liquefied petroleum gas (LPG) and compressed natural gas (CNG) 
• lower green tax for public transport vehicles such as buses
• additional 50% of road tax for vehicles in highly polluted cities, as well as differential tax based on fuel and vehicle type, such as diesel. 

Vehicles of government departments and public sector units that are older than 15 years are to be deregistered and scrapped. Green tax funds are to be kept in a separate account to help States measure pollution and tackle it. 

India has been working on a scrappage policy for years that could, on the one hand, give a boost to the automobile industry and related businesses by stimulating demand, and lead to recovery of steel, aluminium, plastic and so on for recycling, on the other. Newer vehicles conforming to stricter emissions and fuel efficiency standards are more environment-friendly, and have modern safety features. 

In 2016, the government notified the Corporate Average Fuel Economy (CAFE) Standard for passenger vehicles to boost efficiency. Those with not more than nine seats and weighing less than 3500 kg were covered from April 1, 2017. The average fuel consumption standard is given by the Power Ministry’s Bureau of Energy Efficiency (BEE) as less than 5.49 litres per 100 km. A second round of tighter efficiency norms is scheduled for 2022. 

Separate standards for light, medium and heavy commercial vehicles exist. CAFE also regulates CO2 emissions, while other pollutants such as carbon monoxide, oxides of nitrogen and Sulphur are covered by Bharat Stage fuel standards. The benefits from vehicle replacements can be gauged from Transport Ministry data: commercial vehicles making up 5% of the vehicle fleet but contribute an estimated 65-70% of total vehicular pollution. The BEE estimates that higher efficiency norms could result in a fuel use reduction of 22.97 million tons by 2025 in India.

Globally, accelerated vehicle replacement schemes have been used in several countries. The most notable were those in Europe, besides the high-profile, $3 billion “Cash for Clunkers” or CARS (or Car Allowance Rebate System) programme in the US after the 2008 recession. The official evaluation of the US scheme was that it led to an average mileage efficiency increase of 58%, and upgraded vehicles generally were high on environmental benefits such as lower air pollution. Some critics say the US scheme was not carefully targeted to primarily help those who could not afford a replacement. 

The proposed Green Tax in India has the limited objective of nudging the owners of older vehicles to sell them off rather than pay a green tax penalty. Without sufficient incentive or penalty, and careful targeting of vehicles with knowledge of their condition, a tax penalty could be less of a disincentive to commercial vehicle owners, since the tax would be far lower than its resale value and earnings potential; there would be no compulsion to retire it. Continued operation of the vehicles would defeat the clean air objective and bring no cheer to the automobile industry. 

The Centre could offer a green new deal with financial options such as loans and grants to smaller operators to scrap their junk vehicles, while escalating the green tax annually to achieve the nudge effect. A second stimulus to bus companies could help green the fleet and cut pollution. Small operators such as autorickshaws could be offered low-interest loans, particularly to move to electric vehicles. 

(This post is based on an article in The Hindu dated January 31, 2021.)

Chamoli disaster: Focus on dams and hydroelectric projects in Uttarakhand

 On February 7, 2021, a snow avalanche at an altitude of 5600 metres, triggered by a landslide, caused a flash flood in the Rishi Ganga river, a tributary of the Alaknanda in Chamoli district of Uttarakhand. It washed away a small hydroelectric project and destroyed the under-construction 520 MW Tapovan Vishnugad project of the NTPC on the Dhauli Ganga river. The death toll from the disaster was 38 and rising. Scores of people including many workers in the two power projects were missing.

The Chamoli disaster has turned the spotlight on several ongoing dam-based hydroelectric projects, rampant road building, tree felling for projects, and also construction practices in the State. Uttarakhand is geologically unique and remains active in terms of deep movement of rock assemblages. The zone has witnessed several earthquakes of varying intensity, including those with magnitudes of 5.0 or more. Hence, several scientists have questioned the wisdom of large dam-building in Uttarakhand. 

There are also concerns about induced seismic effects caused by the repeated filling and emptying of dams, which may be deforming the surrounding area. In addition, the geology of mountains in many parts of Uttarakhand is such that the threat of landslides is high. Rocks here have been weakened by natural processes across time and are vulnerable to intense rainfall as well as human interference, in the form of house-building and road construction. The careless disposal of enormous debris from mining and construction projects has added to the problem by blocking flow paths.

The IPCC “Special Report on the Ocean and Cryosphere in a Changing Climate” found that in the Himalayan ranges, there could be variations in overall water availability, but floods, avalanches and landslides were likely to increase. 

The aberrations in the Indian summer monsoon caused by climate change  could produce great damage, by bringing debris and silt down the river courses, destroying physical structures, reducing dam life, and causing enormous losses. These problems are also aggravated by the erosion of mountain slopes and the instability of glacial lakes in upper elevations. Also, the retreat of glaciers in the high mountains has resulted in a decline in tourism and local agriculture.

Eight hydroelectric projects totalling 2,490 MW are underway in Uttarakhand. The Union government has been offering incentives since March 2019 to make hydropower attractive. These include classification of large hydropower projects as Renewable Energy sources, creating a separate category for hydropower within Non-Solar Renewable Purchase Obligation, tariff rationalisation to bring down tariff, and budgetary support for putting up enabling infrastructure such as roads and bridges. 

The International Renewable Energy Agency estimated that in 2019, the average cost of electricity in India was $0.060 per kWh for small hydropower projects added over the last decade. In comparison, the global cost for solar power was $0.068 per kWh in 2019 for utility-scale projects. In places such as Uttarakhand, the net benefit of big dams is controversial because of the collateral and unquantified damage in terms of loss of lives, livelihoods and destruction of ecology.

(This post is based on a report in The Hindu dated February 14, 2021.)