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India Panel Seeks Tax to Fund Vehicle Emission Reductions

Source: Bloomberg 6/13/2014, Location: Asia

India should impose a tax on fuel sales to fund refinery upgrades for cleaner fuels so that vehicles can eliminate cancer-causing particle emissions, a government panel said.

The government could levy an extra tariff of 0.75 rupee a liter on gasoline and diesel sales over seven years to collect 640 billion rupees ($10.7 billion) to finance the upgrades, the auto-fuel policy committee recommended in a report posted on the oil ministry’s website.

Without the extra money, state-run refiners such as Indian Oil Corp. (IOCL) won’t be able to supply fuels of the same quality sold in Europe until April 2025, the panel said. That would lag behind emission norms in developing nations, including Vietnam, Brazil and Chile.

India suffers from some of the world’s deadliest air pollution. Vehicles can’t install the necessary equipment to scrub their exhaust of lethal particles, known as PM2.5, until the nation switches to the equivalent of Euro-5 fuel. Meeting a more ambitious target to roll out Euro-5 equivalent fuel by April 2020 would require imposing the tax starting next month, according to the report.

The recommendations come 18 months after the panel was formed under the previous government. They need to be accepted by Prime Minister Narendra Modi’s administration, which took office on May 26, to take effect.

The World Health Organization identifies PM2.5 as one of the most dangerous among air pollutants that cause more deaths worldwide than AIDS, diabetes and road injuries combined.

In India, PM2.5 emissions are emitted by diesel vehicles, whose tailpipe exhaust can carry 10 times the carcinogenic particles found in gasoline discharges. Diesel car sales in India are surging because the subsidized fuel is 20 percent cheaper than gasoline and more efficient on a per-kilometer basis.

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