BUSINESS

Delhi shows the way

WINGS AND WHEELS

ALTHOUGH THE hike in sales tax on diesel from 12 to 20 per cent has been "deffered because of the drought,'' the Delhi administration's proposals with regard to automobile and fuel taxation show an element of rationality that has been sorely lacking in many states.

It is rational on several counts: First, it leads the way in recognising that road congestion has become critical in most of our cities and that more expensive (and that is almost synonymous in our country with larger) private automobiles are a disproportionately major part of the problem, on the move and while parked on public roads. This leads to the conclusion that more expensive vehicles should suffer a higher rate of tax to dissuade their number from growing too rapidly and, perhaps, leading prospective buyers to buy smaller cars.

Second, an additional tax of 2 per cent on diesel powered non-transport private vehicles recognises that these typically pollute much more than their petrol or CNG/LPG fuelled cousins partly because they are (in the present state of their design) `inherently' so and partly because low fuel costs (thanks to socially important use) often leads to much greater, and sometimes, `unnecessary' use. The former is in line with the reasoning with regard to the use of CNG rather than diesel for transport vehicles in the capital. Improvements with regard to diesel engine design, manufacture and, most importantly, fuel quality could allow this differential taxation to be repealed when Euro 4 (or equivalent) standards are consistently met.

Third, there is no reason for diesel fuel (and cars) in Delhi to be so much cheaper than in most other parts of the country. That means that both that the non-diesel car owning citizens of Delhi are subsiding their more fortunate brethren while they are also being subsidised by the rest of India.

It is noteworthy that B. V. R. Subbu, the President of Hyundai India, was the only prominent personality from the automobile industry who supported the proposals, reportedly saying, "I have been a votary of such a decision for a long time. Now there will be parity in the tax paid for by diesel and petrol car users. For instance, the average tax paid per kilometre for a two-wheeler owner is higher than that for a diesel luxury car owner. There will definitely be some consumer shift towards petrol cars but that is welcome. In the future more and more states will follow the same approach." He was, perhaps, reverting to being the academic economist that he was before joining Telco!

Close on the heels of the $5 million order for tail rotors from Bell Helicopters of the U.S. (first reported in this column from Asian Aerospace at Singapore five months ago), comes a much larger order for a thousand (no less!) Airbus A-320 doors worth nearly $80 million over a five-year period.

This new order is not remarkable for the nature of the product because HAL has been producing doors for both Airbus and Boeing for several years, but because it has now become the primary supplier of these structures and not merely an occasional vendor.

Even more importantly, HAL has now been classified as Airbus' "partner" - the first time that has occurred.

And that probably opens the doors (pun unintended) for many more structures (including control surfaces) from other aerospace companies as well.

C. Manmohan Reddy

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