Govt plans to levies on land, sales tax on petrol to boost fund for urban projects

C Shivakumar

Chennai:

Starved of cash to fund the ambitious urban transport projects, the Union government as well as state government is working on an innovative finance mechanism using land as a resource as well as other levies or taxes to create a Dedicated Urban Transport Fund.

Sources told Express that the Union Ministry of Urban development has urged the Tamil Nadu government to give in its input within 15 days on the concept of innovative financing of urban projects, including metro rail project, last month.

The decision by Urban development ministry seeking state government’s suggestion comes as financing of high capital intensive projects through gross budgetary support is not possible considering the financial constraints and other pressing demands of both Union and state governments, sources said.

The suggestions by Union government include levying additional sales tax on petrol, additional registration fee on four-wheelers and two-wheelers, high registration fee for personal vehicles running on diesel, annual renewal fee on driving licence and vehicle registeration, congestion tax, green tax to draw sources for the Dedicated Urban Transport Fund at the state level.

The Centre feels that inelastic demand of petrol with respect to price in a short run would ensure sufficient accruals to the funding which would incentivise people to shift to the public transport system, sources said.

The funds can be used for new projects in urban transport, compensate towards exemption of tax on urban buses and replacement of assets of public transport companies and towards meeting the cost of various other concessions extended to encourage public transport by state government.

Similarly, there are also plans to generate fund out of betterment levy on land in areas which benefit by investment in urban transport projects besides rationalization of parking fee, property development tax, advertisement revenue on transit corridors and employment tax.

This fund at the city level can be used for establishing a fare contingency fund to meet the difference between the public fare paid by commuters and the technical fare, payable to private operators to sustain operations and to provide urban local bodies share for funding the urban transport projects, sources added.