Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do. There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Now as I approach my 90th birthday ( 27 June 2023 ) , I invite you to visit my Digital Avatar ( www.hemenparekh.ai ) – and continue chatting with me , even when I am no more here physically

Thursday 25 February 2021

Taxing the Polluters

 


 

It goes like this :

Carbon Emission > Pollution > Global Warming > Climate Change > Floods > Droughts > Famine > Deaths

 

What can be a Solution ?

Ø  Punishing  people / industries increasing “ Pollution “

Ø  Rewarding people / industries  reducing “ Pollution “

 

How ?

Ø  Heavily taxing those who contribute towards increase in pollution

Ø  Lightly taxing  / No taxing / Giving money to those who help reduce pollution

 

Any specific proposal ?

Yes . And from none other than Dr Raghuram Rajan ( Former Governor – Reserve Bank of India )

At the WORLD LEVEL ,

Dr Rajan [ Raghuram.Rajan@chicagobooth.edu  ) , has proposed :

 

A Climate Action Plan  /  TOI  /  23 Feb 2021

Extract :

Ø  Economists generally agree that an important way to reduce carbon emissions is to tax them. But the changes those taxes bring about will, by design, be disruptive in the short run

 

Ø  Indians, however, believe there’s profound inequity in asking,

      #    India, which has a per capita emission of 1.8 tons of CO2 in 2017, to bear the same burden as the

     #     US (16 tons per person), or

     #    Saudi Arabia (19 tons).

 

Ø  Yet, the least costly way of reducing global emissions would be to give everyone similar incentives India should not build many more dirty coal plants as it grows, and Europe should close down the plants it already has

 

Ø  The economic solution is quite simple:

 

      #     A per-ton carbon levy called the Global Carbon Reduction Incentive (

              GCRI ).

 

     #    Every country that emits more than the per capita world average (5

           tons) would pay into a Global Incentive fund

                      

    #    This annual payment would be calculated by multiplying,

            >    excess emissions per capita , by their

            >   population , and the

            >   GCRI ( $ 10 / ton )

.

 

Ø  # If we started the GCRI at $10 per ton, the US would pay around $36 billion while Saudi Arabia would pay $4.6 billion. Countries below the global per capita average would receive a commensurate payout – Uganda would receive around $2.1 billion, while populous but low-emitting India would get $41.6 billion.

 

Ø  Every country faces a loss of $10 for every ton by which they increase per capita emissions, whether they are at a high, low, or average level today. So India has the same incentives to economise on emissions as the US

 

Ø  Ideally, each country, including recipients, would decentralize GCRI through a domestic carbon tax, which may be set at a higher level

Ø   

Ø  The tax would set developing countries on the right emission path, rewarding their investment in renewables, while discouraging coal.

===================================================

Following Tabulation shows how Dr Rajan’s proposed GCRI [ Global Carbon Reduction Incentive ] will work out

===================================================

 

 

    A

  B

     C

  D

 

 = B - C

 

 ( Net )

E

F =

AxDxE

( Populatio ) x ( Net ) x ( $ 10 )

 

Country

Population ( Million )

2017 per Capita CO2 Emission ( Tons )

2017 world ave per capita CO2

Emission

( Tons )

(-) to receive GCRI

(+ ) to contribute

CGRI proposed by Dr Rajan

$ per ton

 

CGRI

 

$ Million

 

 

 

 

 

 

 

 

Uganda

44

0.14

5

0.14-5  = ( - ) 4.86

10

44x(-4.86)x10

2138

( Get )

India

1370

1.80

5

1.80-5  = ( - ) 3.2

10

1370x(-3.2)x10

43840

( Get )

China

1400

7.18

5

7.18-5  = ( + ) 2.18

10

1400x(+ 2.8 )x10

39200

( Give )

USA

329

16.0

5

16.0-5  = ( + ) 11.0

10

329x(+11)x10

 

36190

( Give )

S Arabia

35

19.0

5

19.0-5  = ( + ) 14.0

10

35x(+14)x10

4900

( Give )

 

 

 

 

 

 

 

 

 

  

Can  you give some examples at  NATIONAL LEVEL  ( what Dr Rajan calls :  Domestic Carbon Tax ? )


Yes , take a look at following tabulation ( not comprehensive / only illustrative )

===================================================

Polluting Industry :   TRANSPORT

Factors Considered for Computing Taxes Payable by Vehicle Owners

===================================================

Factors

Energy Source /

Petrol

Diesel

Hybrid

EV

Ownership

Private /

Public

Purpose

for :

 

People/

Goods/

Agri Use

Vehicle

Age

 

8+   yrs

15+ yrs

Type

 

2 Wheel

3 Wheel

4 Wheel

Capacity

 

1 person

4 person

Many

Roads

Used /

 

City

Highways

Time of

Usage

 

Peak  or

Off-Peak

Status

 

Parked

Or

Running

 

 

 

 

 

 

 

 

 

 

CURRENT TAXES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Toll Tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Road Tax

Engine Capacity

 

 

Weight

 

 

 

 

 

 

 

 

 

 

 

 

 

Green Tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ALL OF THESE TO BE REPLACED BY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trans Tax

 

 

 

 

 

 

 

 

 

 

Factor Weight

15

10

5

5

5

5

25

5

25

 

 

How much will these taxes earn the Government, each year ?

 

[ A ] …. Toll Tax 

            Rs  54,750 Crore / year ( assuming daily collection will reach Rs 150 cr by

            end March 2021 )

 

[ B ]  …..Green Tax

             Rs   3,000 crore ( for 2021 ) , assuming :

             #   Total vehicle population in India , as of Dec 2020  =  300 million

             #   Of the above, OLD vehicles attracting GREEN TAX =   30 million

             #   Green Tax to be collected per year per OLD Vehicle = Rs 1,000

             #   Total collection for 2021 = Rs 1,000 x 30 million = Rs 3,000 crore

 

ASSUMING :

Ø  Number of old vehicles in Jan 2021 =    30  million

Ø  New vehicle sale per year               =    20  million

Ø  Vehicles getting “OLD “ each year   =    10 % of opening population 

       

Year

Opening

Population ( Million )

Added during Year

(new)

Year-End closing balance

 

( Less ) Scrapped during year

Giving Year-End

Total Vehicle Population

 

10 % of Opening Population ( New Addition )

Carried Forward

No of  vehicles which would attract GREEN TAX ( New+carried Forward )

2021

300

20

320

 

10

310

30

30

30+30=60

2022

310

20

330

 

10

320

31

60

60+31=91

2023

320

20

350

 

10

340

32

91

91+32=123

 

 

 

 

 

 

 

 

 

 

 

Assumptions made above may not be accurate. But, with all the inaccuracies, following generalizations seem safe :


Ø  New vehicle production would be much more than 20 million / year , assumed

 

Ø  Scrapping of OLD vehicles would be much less than 10 million / year , assumed

 

Ø  This would mean that the number of vehicles liable for GREEN TAX would be substantially higher

 

 

[ C ]……   ROAD TAX :

 

Each State has widely differing rates of Road Tax ( either a big lump-sum collected once during first sale by a dealer , or a smaller amount every year ) . Several factors are taken into consideration for calculating Road Tax , making it a complicated exercise


For sake of simplification, I assume that ( on an ave ) , road tax would work out to 10 % of the  sale price ( at dealer )


Taking auto industry value at $ 118 billion ( Rs 8,52,314 Crore ) , road tax ( all states put together ) , could be as much as Rs 85,231 Crore )

 

Summarizing :

Ø  Toll Tax…………………..Rs   54,750 Cr / year

Ø  Green Tax……………….Rs  10,000 Cr / year ( by 2023 ) – and rising by the year

Ø  Road Tax……………..   Rs  85, 231 Crore / year now possibly rising by 10 % per year


 (                               Industry Growth rate

===================================================

Total Taxes …………………………  Rs  1,49, 981 Crore / year

===================================================

[ D ] …. TRANS-TAX


In my suggestion  ( Transport : an Integrated Logistic Plan ? ), based on the HARM QUOTIENT generated ,

 

Ø  More polluting ( ICE + PRIVATE ) vehicles, may end up, paying Rs 100 / day

 

Ø  Less polluting ( EV + Public Transport ) vehicle, may end up paying only Rs 10 / day

 

Let us assume an ave Trans-Tax of Rs 30 / day = ( approx. )  Rs 10,000 per year per vehicle


Now, we have 300 million vehicles. That would amount to collection of :


300 million x Rs 10,000  = Rs 300,0000 million = Rs 300,000 crore  = Rs 3 Lakh*crore


This is twice of ( Toll Tax + Green Tax + Road Tax ), being collected currently  !

 


Dear Shri Gadkariji,


Beauty of my proposal is :

Ø  It will replace complicated ( TOLL TAX + GREEN TAX + ROAD TAX ) with just one tax

Ø  It will be an AUTOMATIC ( no-human intervention ), FASTag based debit system ( 24x7 )

Ø  It will be NaviC satellite tracking based

Ø  No need for millions of vehicle owners to fill in COMPLIANCE FORMS ( even if, online )

Ø  It will promote LESS POLLUTING TRANSPORT with less congestion

Ø  No need to incentivize EV manufacturers or subsidize EV buyers

Ø  It will be an UNIFORM , ONE SINGLE vehicle-taxing system for entire country

Ø  With liberalization of GEO-SPATIAL DATA sharing / utilizing , no more technical hurdles

 With regards,

Hemen Parekh  /  hcp@RecruitGuru.com  /  25 Feb 2021

===================================================

References :

Toll Tax

Get FASTag for free at toll plazas till March 1  

FASTag drive toll collections to record Rs 102 cr

Green Tax

Gadkariji : Green Tax is Good ……………….[ 26 Jan 2021 ]     

 

Trans Tax

Transport : an Integrated Logistic Plan ? ……….[ 20 Nov 2018 ]

 

https://www.investindia.gov.in/sector/automobile

The $118 bn Automobile industry is expected to reach $300 bn by 2026.

https://www.bankbazaar.com/driving-licence/rules-regulations-of-road-tax-india.html

 

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