Sub-committee suggested Creation of a National fund for Urban Transport Projects

A government sub-committee set up to look into probable sources of funds for urban transport projects in the 12th Plan recommended creation of a national fund, resource for which can be generated through taxes on vehicles and petrol consumption. The Sub-Committee on Financing Urban Infrastructure in the 12th Plan report suggested investments to the tune of Rs 87000 crore in the Five Year Plan duration.

The sub-committee, constituted by the Urban Development ministry opined that the huge investment needs cannot be met only from traditional budgetary sources alone.

A dedicated urban transport fund at the national level as envisaged in (National Urban Transport Policy) or NUTP-2006 was recommended. The sub-committee also identified some sources of revenue for the creation of the National Urban Transport Fund which were based on Polluters pay Principle and aimed to reduce the use of personal vehicles.

The report recommended imposition of green surcharge of Rs 2 on petrol sold across the country as the fuel is exclusively consumed by personalised vehicles and its other uses are limited. The green surcharge on sale of petrol in the country is expected to generate about Rs 3100 crore in the base year.

The sub-committee in its report also mentioned imposition of a green cess on existing personalised vehicles to raise funds for urban infrastructure.

The report observed that all vehicles in India are required to be insured annually. There are several enterprises which provide insurance to the vehicles at the rate of 3% of the annual insured value both for car and two-wheelers. The sub-committee proposed collection of an additional 4% of the vehicle's insured value as green cess. As per the estimates of the subcommittee the total collection from green cess for the NUTF is to be about Rs 18000 crore.

The sub-committee proposed an urban transport tax on purchase of new cars and two-wheelers for which an additional tax of 7.5% and 20% on personalised petrol and diesel vehicles respectively.

The government constituted sub-committee claimed these levies apart from helping in generating resources for urban transport projects will also discourage the use of personalised vehicles.