Taxing polluting vehicles and incentivizing hybrid and electric vehicles.?

Taxing polluting vehicles and incentivizing hybrid and electric vehicles.? Relevant draft rules, including those pertaining to construction and demolition waste havebeen notified;? Delhi? The green cess on commercial vehicles entering Delhi has been hiked by the topcourt by a whopping 100 per cent. The SC-appointed Environment Pollution ControlAuthority has directed the Delhi government to install boards notifying the new cessin 125 toll booths across Delhi.? The Delhi government has proposed the odd/even rule wherein cars with odd-numbered registration plates would ply on odd dates and those with even-numbered registration plates would do so on even dates. The idea is to reducecongestion as well as to reduce pollution resulting from vehicular emissions.? The Delhi government has imposed an environment compensation penalty of Rs50,000 on 38 major projects across the city for causing dust pollution. Officials saidnotices have been sent to all the projects. While a few of the projects have repliedasking for ‘reconsideration’ of the compensation fee, 26 of them are yet to file theirreplies? Recently the Indian government took some steps in this direction committing to a50% reduction in households using solid fuel for cooking and, last December,removing subsidies for polluting cooking gas to improve access to clean fuel forhousehold cooking.Bank Guarantees. Some states (e.g., Maharashtra, Andhra Pradesh, West Bengal) employ a bankguarantee scheme as a means of ensuring compliance with SPCB directives. Under this scheme, astate board requires the non-complying firm to post a bank guarantee to ensure theimplementation of corrective actions in accordance with the negotiated compliance schedule.Renewal of a CTO is conditional on posting the guarantee. Normally, 10% of the estimated totalcompliance cost is required as a bank guarantee. If the non-complying firm fails to comply intime, the SPCB forfeits a portion or all of the bank guarantee for its discretionary use. There isno official procedure to determine the amount of forfeiture, and the decision is made by theSPCB Chairman and Member Secretary (in principle, it should be proportionate to the extent ofviolation).Between January 2005 and August 2006, the West Bengal PCB imposed 92 bank guaranteesworth USD 3.5 million, of which two were forfeited. Since 2003, the West Bengal PCBreallocates 50 percent of revenues from forfeited bank guarantees for environmentalimprovements in the area where the noncomplying facility is located. The forfeiture is a powerfulmonetary penalty for a violator and a significant deterrent against future non-compliance.However, this instrument may not be applicable to SMEs which operate on small profit marginsand cannot afford such a deposit. In addition, many issues related to the application of bankguarantees remain to be clarified: how the guarantee should be calculated, how forfeitures shouldbe calculated and revenues used, whether supplementary collateral should be required if thecompliance schedule is extendedIndia already has a number of financial incentives aimed at promoting renewable energydevelopment and environmental conservation. renewable energy: Various incentives are extended to industries engaged in the manufactureand utilisation of new and renewable sources of energy. Import of devices such as vacuum solarcollectors, concentrating solar collectors, stirling engines, wind-operated electric generators andbattery chargers, and filter media required for effluent treatment plants and recovery of biogasfrom it are exempt from customs duty. Since March 1992, imports of non-conventional energyequipment have been totally exempt from duty. Various state governments allow concessions orexemptions in sales tax on new and renewable energy systems. Customs duty has been reduced on import of machinery and components required for themanufacture of solar photovoltaic devices. Many relevant items have also been either exemptedfrom excise duties or granted substantial concessions. The Central and state governmentsextend several subsidies and concessions, including a 100 per cent rate of depreciation, forlarge-scale utilisation of photovoltaic systems. No industrial licence is necessary for projects thathave no foreign investment. Wind electric generators: Between July 1991 and March 1992, an import duty of 40 per centwas imposed on wind electric generators (WEG) and battery chargers to encourage localproduction. However, the duty came at a time when a number of wind-farm projects usingimported WEG were being considered by private companies. The combined effect of the importduty and rupee devaluation adversely affected the economics of wind-based electricitygeneration. On the other hand, local assembly and production of wind turbines saw little progressdespite the fact that import of a number of components are allowed without duty. The 1992-93budget removed this duty on WEGs. Under the industrial policy announced in July 1991, industries engaged in the manufacture ofalternative energy systems such as solar, wind and related equipment have been grantedautomatic approval of foreign technology agreements, including 51 per cent foreign equity.Central subsidies are provided for the utilisation of non-conventional energy systems. The fiscalincentives include tax benefits and accelerated depreciation at the rate of 100 per cent in theyear of installation. Upto 80 per cent of the cost of wood gasifiers and stirling engines is borne bythe Union Ministry of Non-Conventional Energy Sources and the remaining 20 per cent by theuser or the state nodal agency. The Indian Renewable Energy Development Agency has sanctioned financial assistance to 52projects worth Rs 24.84 crore, of which international aid accounts for 16.79 crore. water pollution: Under the Water (Prevention and Control of Pollution) Cess Act, 1977, the stategovernments used to collect a cess from polluting industries and credit it to the consolidated fundof India. Since 1987-88, however, the Ministry of Environment and Forests collects the moneyand gives it to the state pollution control boards. The state boards received Rs 6.37 in 1990-91and Rs 6.30 crore in 1991-92. A similar amount is estimated for 1992-93. The Water (Prevention and Control of Pollution) Cess (Amendment) Bill, 1991, which amongother things provides a rebate to industries for complying with effluent quality standards, hasbeen passed by Parliament. The amended act became effective from January 26, 1992. Itenhances the cess rates and incorporates incentives and disincentives based on pollution loads.With effect from April 1, 1992, 75 per cent of the funds will go to the state boards, while 25 percent will be retained by the Central government to encourage research and development in cleantechnologies and to assist local bodies set up sewage treatment plants. According to a 1990 notification, certain pollution control equipment attracts an excise duty ofonly 5 per cent. An earlier notification, in 1989, reduced to 35 per cent customs tariff on 35 kindsof imported equipment used in pollution control and for safety in chemical industries. Additionalduties have also been waived for such equipment. According to the materials division of the Central Pollution Control Board, pollution-assessingequipment worth a maximum of Rs 3 crore per annum and consumable items worth a maximumof Rs 1 crore per annum can be imported without paying customs duty. Individual items in bothcategories, however, have a ceiling of Rs 10 lakh and Rs 1 lakh each per annum. To importgoods above these limits, permission is necessary from the Directorate General of Trade andDevelopment. deforestation: India is encouraging the import of wood and wood pulp to conserve its forestresources. Wood and wood articles are charged a concessional import duty of 10 per cent.Processed wood is charged 20 per cent duty, and mechanically processed wood 45 per cent. Rayon grade pulp wood attracts 25 per cent duty. Only 10 per cent duty is charged on wood pulpderived from chemical and mechanical processes. Paper and paper boards are charged anaverage 40 per cent duty. Imported newsprint that uses not less than 70 per cent wood pulp is exempt from duty, but otherforms of newsprint are charged at the rate of 45 per cent. India imported wood pulp and wastepaper worth Rs 454.33 crore during 1990-91. there/ (14-2- 93)India, in line with global trends, has witnessed some activity in the adoption and implementation ofEFR. One of the most newsworthy events was the removal of government subsidy for petrol in 2010paving the way for marketbased pricing. It has been conclusively established that the petrol subsidywas only benefitting the well off since petrol is mainly used for passenger cars, so the government’ssignificant fiscal burden was not serving any social purpose. This step encountered relatively littlepublic outcry, but the full removal of fuel subsidies on diesel, LPG, and kerosene are likely to havemuch wider implications and are therefore still under discussion (Anand, Coady, Mohommad,Thakoor, ; Walsh, 2013). The National Clean Energy Fund (NCEF) instituted in 2010e2011, by levyinga clean energy cess on coal produced in India and imported coal at a nominal rate of Rs. 50 per ton,is seen as a major step in India’s quest for energy security and reducing carbon intensity of energy.The NCEF was created for funding research and innovative projects in clean energy technologies.But, it has been observed that utilisation of funds from NCEF, which has accumulated more than INR8200 crores, has been rather low and disbursements, so far, are aligned more with on-goingprogrammes/missions of various ministries/departments than with the stated objectives of the fund.Many opportunities exist in improving efficiency and addressing climate change concerns.Development and adaptation of technologies for mining low ash coal and efficient coal handling hashuge potential. Coal beneficiation improves its thermal effi- ciency and reduces operation andtransport costs of power plants and other users. Coal bed methane and underground coalgasification are other areas which would need support with technology adaptation (Pandey, Bali, &Mongia, 2013).Another important example is the Ministry of Environment and Forests’ long-running subsidy forcommon effluent treatment plants (CETPs), which is helping small scale industries in industrialclusters across the country to manage their wastewater more cost-effectively. In 1991, the Ministryof Environment and Forests (MoEF) initiated an innovative financial support scheme for CETPs topromote common facilities for treatment of effluents generated from small scale industrial (SSI)units located in clusters. Under this scheme, the contribution from central and state governmentswas 50% of the capital cost, with 25% each from central and state governments. The above schemewas revised in 2012 in light of operational deficiencies in the earlier scheme, the development ofpollution control technologies over the years, financial constraints on the part of SSI proponents,and recommendations of the State Pollution Control Boards (SPCBs) related thereto. As per therevised scheme, the central assistance is now 50% and the state assistance is 25%, with theproponent bearing only 25%. For CETPs involving primary/secondary/tertiary treatment, financialassistance would be provided by the Government of India to the tune of 50% of maximum INR 1.50crore/MLD (million litres per day) capacity, subject to a ceiling of central assistance of INR 15 croresper CETP. For CETPs involving primary/secondary/tertiary treatment and ZLD (zero liquid discharge)treatment, financial assistance would be provided by MoEF to the tune of 50% of maximum INR 4.50crores/MLD capacity, subject to a ceiling of central assistance of INR 20 crores per CETP (MoEF,2011).There have been a number of market based instruments (MBIs) introduced recently in the field ofenergy policy which do have an important indirect impact on environmental policy. In order toincrease energy efficiency uptake in industries in a cost-effective manner, the Bureau of EnergyEfficiency (BEE) has launched a market based mechanism called the Perform, Achieve, and Trade(PAT) programme in 2012. The PAT mechanism entails targets in terms of specific energyconsumption for covered industries, across eight 196 A. Chaturvedi et al. energy intensive sectors.Industries can meet targets through energy efficiency programmes or through purchase of energysaving certificates from other industries which have exceeded their targets. The programme coversfacilities that account for more than 50% of the fossil fuel used in India and will help to reduce CO2emissions by 25 million tons per year by 2014e15 (EDF ; IETA, 2014). Another market basedmechanism that has been introduced in India is the trading of Renewable Energy Certificates (RECs)coupled with Renewable Purchase Obligations (RPO). The mechanism calls for renewable energytargets for utilities, captive power producers, and open access consumers. These targets can be metthrough renewable energy generation, or through purchase of RECs from other generators (EDF ;IETA, 2014). Based on these recent developments, the Ministry of Environment and Forests (MoEF)and the Central Pollution Control Board (CPCB) have also envisaged an Emission Trading Scheme(ETS) to target local pollutants such as SOx, NOx, and suspended particulate matter (EDF ; IETA,2014). Currently, pilot projects are scheduled to be undertaken in three states, namely Gujarat,Tamil Nadu, and Maharashtra. However, the complexity of creating and implementing an ETS, whichrequires extensive and accurate baseline data and monitoring, means that it needs to be approachedcarefully and methodically, building upon regulatory experience with other MBIs. However, eventhough EFRs are being accepted in India as an effective option for tackling industrial pollution, thescale of adoption of EFR needs to be augmented and innovative solutions are required to bringabout transformational change, as opposed to isolated success stories. s2.0-S0970389614000603- main.pdf?_tid=d0245d6c-f5d0-11e7- 8c36-00000aacb361;acdnat=1515566465_a4e18e0de05de99a8953532e577d377fUse of fiscal instruments for environment in India3.3.2 Consent fees under the Water and Air ActsUnder the Water Act 1974, all new industries falling in different categories (Red, Orange and Green)are required to get consent to operate by paying a Consent Fee to the concerned SPCB fordischarging sewage and /or trade effluents within the standards. The consent fees are fixedprogressively depending upon the capital investment structure of the industrial units seeking theconsent. Under the same Act, the municipal corporations and councils discharging sewerageeffluents have to take a prior consent from the SPCB, for which a consent fee is charged. Under theAir (Prevention and Control of Pollution) Act of 1981, all newly established industrial units have toobtain consent to operate from the SPCB by paying a consent fee for discharge of emissions into theair within the standards established by the SPCB. In both these cases, apart from the proceeds beinglow, such fees are rarely used for organizing and managing the sewerage or better air qualitymanagement systems. The fee collections are treated as revenues for the PCBs. The consent feeswere not revised for quite some time, despite the changing capital investment structure of differentindustries changed significantly over time.3.3.3 Depreciation allowance on plant and machinery used for pollution controlThe central government has notified a list of machinery and plants on which an investmentallowance is granted under section 32A of the Income Tax Act of 1961. Investments upto 35 percentof the actual cost of new machinery or plant to assist in the control of pollution and protection ofenvironment (such as ETPs and APCs) are granted depreciation allowance in the first year itself.Additionally, certain specific equipment qualifies for 100% depreciation. These are, broadly, airpollution control equipment, water pollution control equipment, solid waste control equipment,energy saving devices, and certain renewable energy devices. The 2011-12 budget of India hasreduced the basic customs duty on solar lanterns from 10 per cent to 5 per cent and completelyeliminated the duty on a few more inputs used in the manufacture of solar modules/ cells. Thishighlights the emphasis being laid by the government in promoting renewable sources of energy.Budget has reduced the basic customs duty to 2.5 per cent from 5 per cent on specified agriculturalmachinery and their parts which are expected to encourage their domestic production. However thebenefits to marginal farmers are not very evident. On the other hand, the reduction in custom dutyon micro-irrigation equipment from 7.5 per cent to 5 per cent to promote the efficient means ofirrigation especially for dry land farming may not make much difference to a large farmer. Thusinitiatives need to be introduced that benefits all types of farmers rather than some specific group.One effort in this direction could be to extend grants to companies which work in extension servicesin villages to ensure that the benefit reaches the farm gate for all types of farmers.3.3.4 Fiscal instruments for solid waste managementIn line with implementing the JnNURM mission, many cities have levied/planning to levy monthlyuser charges on households, shops and other category of waste generators. These rates are aimingto recover the entire cost of O;M for collection, transport, and disposal of waste if appropriatecollection of user charges is achieved. For more discussion on these charges, see Appendix to thisreport where case studies from 3 cities in India are discussed. The Indian state of Kerala, has reducedthe tax on waste management equipment to 4 per cent to encourage more activity in that sector.They have also exempted paper bags from tax and increase the tax on plastic carry bags to 12.5 percent to discourage their use. This is in addition to a previous ban on thin plastic bags (i.e., less than0.03 millimeters thick).3.3.5 Removing price control on petro productsIn the energy sector, the Indian government has taken steps towards removing price control on oiland coal, and lowering subsidies in energy in general. Coal prices were freed in 2000. However, dieto subsidies on transportation, final coal prices remain below the market prices. With thedismantling of the administered pricing mechanism in April 2002, subsidies on all oil products wereremoved barring liquefied petroleum gas and kerosene mainly used in the household sector.3.3.6 Imposition of coal taxIn 2010, government of India introduced a nationwide carbon tax of INR 50 (€0.83) per metric ton ofcoal both produced and imported into India. This is a step towards helping India meets its voluntarytarget to reduce the amount of carbon dioxide released per unit of gross domestic product by 25 percent from 2005 levels by 2020. India’s Finance Ministry is considering a plan to use part of this year’sINR 25 billion (€0.42 billion) coal tax receipts to invest in new power transmission lines that will helpin distributing electricity from clean energy projects. It would provide viability funding to thosestates to extend their transmission networks to solar plants, wind farms and other clean-energyprojects being currently built in India. In continuity of its recognition of the importance of protectionand regeneration of forests in terms of its ecological, economic and social value, the 2011-12 budgetof India had proposed to allocate INR 200 crores (€0.033 billion)from the National Clean Energy Fundto Green India mission.Complimentary subsidiesEnvironmental promoting subsidies are an important element under the EFR. These should be drawnfrom the general budget. In 2010-11, the budget of India had taken several initiatives in the directingincluding support for installing a zero liquid discharge system as Thirupur in Tamil Nadu and supportfor the National Ganga River Basin Authority. The Thirteenth Finance Commission recommendedthree specific grants for promoting environment in addition to various state specific grants whichwere aimed at increasing the forest cover in India, promoting connectivity of renewable energy toNational grid and better management of water resources.3.3.8 Supporting renewable energyFiscal incentives are given in the form of interest and capital subsidies for promoting identifiedtechnologies/systems in the country through the Indian Renewable Energy Development Agency(IREDA), a public sector company of the Ministry and also through other nationalized banks andfinancial institutions. These incentives include 100 per cent accelerated depreciation for taxpurposes to the manufacturers and users of renewable energy systems, exemption of excise duty ona variety of capital goods and instruments related to renewable energy systems, and subsidies fordevices with high initial cost. Renewable Energy Special Economy Zones (SEZ) are also providedseveral tax incentives. Several states have announced their respective policies in respect of variousrenewable energy sources including wind, small hydro and biomass. There are also many productionlinked fiscal instruments also existing- generation based incentives in case of wind energy @ 50paise/kwh (1.2 cents/kwh) and renewable energy certificates driven by renewable purchaseobligations.