Revenue from Road Transport in India

 

Revenue from Road Transport in India

Subroto Kumar Ghosh, Research Scholar, Email : ghosh.com@gmail.com, Mobile : +91 97714 73885

University Department of Commerce & Business Management, Ranchi University, Ranchi.

Dr. Dilip Kumar Sahu, Assistant Professor,

Department of Commerce, J. N. College, Dhurwa, Ranchi.

Abstract

Transport industry plays an important role in the development of economy of a nation. The Road Transport industry has a lion’s share in India’s economic development. Road transport is vital to the economic development and social integration of the country. Due to easy accessibility, flexibility of operations, door to door service and reliability, Road Transport in India showed an increase in share of both passenger and freight traffic vis-à-vis other modes of transport. Transport helps in increase in the demand for goods. Through transport newer customers in newer places can be easily contacted and products can be introduced to them. Today markets have become national or international only because of transport. Transport identifies competition, which in turn, reduces pries. Prices are also reduced because of the facilities offered by transport for large-scale production. An advantage of large-scale production is possible only due to transport. Transport helps in stabilization of price. Transport exerts considerable influence upon the stabilization of the prices of several commodities by moving commodities from surplus to deficit areas.  This equalizes the supply and demand factors and makes the price of commodities stable as well as equal. Transport sector accounts for 6.4% share in India’s Gross Domestic Product (GDP). However, Road Transport has emerged as a dominant segment in India’s transportation sector with a share of 4.8% in India’s GDP comparison to rail-ways that has a meager 1% share of GDP in 2015-16. The Road Transport Sector has grown significantly during the past five decades.  Road Transport has deep linkages with the rest of the economy and a strong multiplier effect.  Transport is essentially a derived demand depending upon the size and structure of the economy and the demographic profile of the population. With the help of this research paper we had tried to examine the revenue structure of Road Transport sector in India. Besides this we had also focused on some suggestion for improvement of revenue in Road Transport sector of India.

Keywords:  Economy, Taxation, Gross Domestic Product (GDP), Improvement of Revenue

Revenue from Road Transport in India

Subroto Kumar Ghosh, Research Scholar, Email : ghosh.com@gmail.com, Mobile : +91 97714 73885

University Department of Commerce & Business Management, Ranchi University, Ranchi.

Dr. Dilip Kumar Sahu, Assistant Professor,

Department of Commerce, J. N. College, Dhurwa, Ranchi.

________________________________________________________________________________________________________________________________________________________________________

Introduction:

Road transport has emerged as the dominant segment in the lndian transport sector with a share of 3.2 per cent in India’s Gross Domestic Product (GDP) in 2012-13 and this share remained almost the same at 3.19 percent during 2014-15. Easy accessibility, flexibility of operations, door-to-door service, and reliability has contributed towards a steady increase in the modal share of road transport in the movement of both freight and passengers.

ln a globalised world, an efficient road transportation system is vital for increasing productivity and enabling the country to compete effectively in the world market. A world class road transport system is essential for lending competitive edge to the economy.

Sustained economic growth, increasing disposable income, and rising urbanization has led to rising demand for road transport and personalized mode of transport (cars and two-wheelers), in particular. This is reflected in high annual compound growth in vehicle population of 10.5 per cent during 2003-2013. However, the vehicles ownership level per 1,000 persons in India is still low at around 149 compared to more than 500 for most of the high income countries. lt is, therefore, clear that despite the rapid increase in growth of motor vehicles population, we are still at the low end in the vehicle ownership league with a possibility of substantial scope of expansion over the coming years. The road transport sector in many ways exemplifies both the challenge and opportunity in infrastructure development.

 

Overview of Road Transport Sector

1. Introduction of Road Transport Sector in India

1.1       A well-knit and coordinated system of transport plays an important role in the sustained development of country. Transport sector in India comprises of various modes of transport such as roads, railways, air, shipping, inland waterways and metro rail. One of the dominant segment in India’s transportation sector is Road transport. Road transport is vital to the economic development and social integration of the country. Easy accessibility, flexibility of operations, door-to-door service and reliability have earned road transport a greater significance in both passenger and freight traffic vis-à-vis other transport modes. Road transport facilitates the movement of goods and people. Road transport is the primary mode of transport which plays an important role in the movement of goods and passengers. It is also a key factor for promoting socio-economic development in terms of social, regional and national integration.

1.2       Sustained economic growth has brought about expansion of the transport sector. The share of transport sector in Gross Domestic Product (GDP) of India has increased from 4.7 % in 2011-12 to 4.9 % in 2012-13 and reduced to 4.8 in 2013-14. The contribution of road transport sector in GDP has also increased from 3.1% in 2011-12 to 3.2 % in 2012-13 and then reduced to 3.1% in 2013-14. The share of various sub-sectors of the transport sector in the GDP since 2011-12 at base year 2011-12 is given in Table1.

 

Table 1: Share of Different Modes of Transport in GDP at Basic Price and Constant prices
Sector	2011-12	2012-13	2013-14
Percentage of GDP at the base year 2011-12
Transport of which:	4.7	4.9	4.8
Railways	0.8	0.8	0.9
Road Transport	3.1	3.2	3.1
Water Transport	0.1	0.1	0.1
Air Transport	0.1	0.1	0.1
Services	0.8	0.8	0.8
Source : Central Statistical Organization

 

2.  Registered Motor Vehicles in India

 

2.1       India is experiencing a continuous increase in the number of registered motor vehicles depicted in Chart-1. The total number of registered motor vehicles increased from about 0.3 million as on 31st March, 1951 to 182.4 million as on 31st March, 2013. The total registered vehicles in the country grew at a Compound Annual Growth Rate (CAGR) of 10.5% between 2003 and 2013.

 

 

 

Chart 1 : Total Number of Registered Motor Vehicles (in million) 1951 - 2013

Number of Registered Motor Vehicles (in million)

 

2.2       Composition of Registered Motor Vehicles: The share of two wheelers in total registered motor vehicles in India stood at 72.7% during 2013 as compared to 8.8% during 1951 (Table 2). Concomitantly, the share of cars, jeeps and taxis in the total number of registered vehicles was at 13.6% as on 31st March, 2013, marking a steep decline from 52% during the period 31st March, 1951. The share of buses in total registered vehicles declined from 11.1% during the period 31st March 1951 to 1.0 % as on 31st March 2013. However, omni buses were included in the fleet of buses from 2001. The number of registered goods vehicles, which had accounted for 26.8% during the period 31st March, 1951 decreased to 4.7 % of the total vehicles in the country as on 31st March, 2013. The share of ‘other vehicles’, which include tractors, trailers, three wheelers (passenger)/Light Motor Vehicles (LMVs) and other miscellaneous vehicles, increased sharply from 1.3% during the period 31st March, 1951 to 8.0% as on 31st March, 2013.

 

 

 

 

 

Table 2: India - Composition of Vehicle Population (% of total)
As on 31st March	Two Wheelers	Cars, Jeeps & Taxis	Buses	Goods Vehicle	Other Vehicles	Total
	(as % age of total vehicle population)					(Million)
1951	8.8	52.0	11.1	26.8	1.3	0.3
1961	13.2	46.6	8.6	25.3	6.3	0.7
1971	30.9	36.6	5.0	18.4	9.1	1.9
1981	48.6	21.5	3.0	10.3	16.6	5.4
1991	66.4	13.8	1.5	6.3	11.9	21.4
2001	70.1	12.8	1.2	5.4	10.5	55.0
2002	70.6	12.9	1.1	5.0	10.4	58.9
2003	70.9	12.8	1.1	5.2	10.0	67.0
2004	71.4	13.0	1.1	5.2	9.4	72.7
2005	72.1	12.7	1.1	4.9	9.1	81.5
2006	72.2	12.9	1.1	4.9	8.8	89.6
2007	71.5	13.1	1.4	5.3	8.7	96.7
2008	71.5	13.2	1.4	5.3	8.6	105.3
2009	71.7	13.3	1.3	5.3	8.4	115.0
2010	71.7	13.5	1.2	5.0	8.6	127.7
2011	71.8	13.6	1.1	5.0	8.5	141.8
2012	72.4	13.5	1.0	4.8	8.3	159.5
2013	72.7	13.6	1.0	4.7	8.0	182.4
Source : Offices of State Transport Commissioners / UT Administrations
Note : "Other Vehicles" includes tractors, trailers, three wheelers (passenger vehicles) / LMV and other miscellaneous vehicles which are not classified separately

 

2.3       Growth of Vehicles vis-a vis Roads: The CAGR of the total registered motor vehicles in India during the period 2003 to 2013 was 10.5% (Table 3). Amongst the various categories of vehicles, the highest CAGR during the period 2003 to 2013 was recorded by cars, jeeps and taxis (11.2%), followed by two-wheelers (10.8%), buses (10.1%) and goods vehicles (9.4%). Between 2003 and 2013, the total vehicle population grew at a CAGR of 10.5 per cent vis-a-vis the CAGR of 4.0 per cent in the total road length.

Table 3 : Compound Annual Growth Rates (in%) in Vehicles and Road Length
Period	Vehicles						Roads
	Two Wheelers	Cars, Jeeps & Taxis	Buses	Goods Vehicles	Others	Total	NHs	SHs & OPWD	Rural	Urban	Project	Total
1961/1951	12.5	6.9	5.3	7.4	26.5	8.1	1.9	4.0	-0.5	NA	NA	2.7
1971/1961	20.7	8.2	5.1	7.4	15.0	10.9	0.0	2.6	6.0	4.5	NA	5.7
1981/1971	16.3	5.4	5.6	4.9	18.1	11.2	2.9	4.5	5.9	5.5	3.5	5.0
1991/1981	18.4	9.8	7.4	9.4	10.9	14.8	0.6	2.1	7.2	4.3	1.2	4.6
2001/1991	10.5	9.1	6.7	8.1	8.6	9.9	5.5	3.1	4.6	3.0	0.6	3.8
2011/2001	10.2	10.5	9.7	9.1	7.6	9.9	2.1	3.0	3.4	5.0	2.3	3.3
2013/2003	10.8	11.2	10.1	9.4	8.1	10.5	3.1	4.0	4.3	4.1	1.8	4.0
Note : NHs : National Highways; SHs : State Highways; PWD : Other Public Works Department Roads
Note : "Other Vehicles" includes tractors, trailers, three wheelers (passenger vehicles) / LMV and other miscellaneous vehicles which are not classified separately
Sources :	1. Offices of State Transport Commissioners / UT Administrations
	2. "Basic Road Statistics of India, 2002-13"

 

2.4       Chart-2 depicts the share of different categories of vehicles in the total registered motor vehicle population, as on 31st March 2013. Two-wheelers accounted for the largest share of 72.7%, followed by cars, jeeps and taxis (13.6%), other vehicles (8.0%), goods vehicles (4.7%) and buses including omni buses (1%).

 

 

 

 

 

 

 

 

 

 

Chart 2: Composition of Registered Motor Vehicle

 

2.5       The share of different categories of vehicles between 1951 and 2013 is represented in Chart-3 given below;

Chart – 3 indicates that the share of two wheeler population in total vehicles had a steep rise between 1951 and 1991, thereafter, it increased gradually. The percentage share of the rest of the vehicle categories except other vehicles declined sharply from 1951 to 2001 and thereafter remained nearly stagnant. The percentage share of other vehicles in total registered vehicles had an increasing trend between 1951 to 1981; thereafter the share had been declining during 1981 to 2013.

Total Number of Registered Motor Vehicles in India: 1951-2013
Table 1.1						(in thousand)
Year (As on	All	Two	Cars, Jeeps	Buses @	Goods	Others**
31st March)	Vehicles	Wheelers*	and Taxis		Vehicles
1	2	3	4	5	6	7
1951	306	27	159	34	82	4
1956	426	41	203	47	119	16
1959	562	67	267	48	148	32
1960	605	76	282	54	157	36
1961	665	88	310	57	168	42
1962	749	116	340	60	189	44
1963	847	140	375	63	215	54
1964	906	168	388	67	224	59
1965	1,006	202	428	70	242	64
1966	1,099	226	456	73	259	85
1967	1,191	286	482	76	266	81
1968	1,332	347	522	83	285	95
1969	1,474	417	574	86	298	99
1970	1,658	503	628	92	322	113
1971	1,865	576	682	94	343	170
1972	2,045	656	740	100	364	185
1973	2,109	734	709	95	308	263
1974	2,327	838	768	105	323	293
1975	2,472	946	766	114	335	311
1976	2,700	1,057	779	115	351	398
1977	3,260	1,415	878	119	383	465
1978	3,614	1,618	919	124	403	550
1979	4,059	1,888	996	133	444	598
1980	4,521	2,117	1,059	140	473	732
1981	5,391	2,618	1,160	162	554	897
1982	6,055	3,065	1,243	173	613	961
1983	6,973	3,654	1,385	185	675	1,074
1984	7,949	4,351	1,455	199	742	1,202
1985	9,170	5,179	1,607	223	822	1,339
1986	10,577	6,245	1,780	227	863	1,462
1987	12,618	7,739	2,007	245	984	1,643
1988	14,818	9,300	2,295	269	1,114	1,840
1989	16,920	10,965	2,486	278	1,179	2,012
1990	19,152	12,611	2,694	298	1,238	2,311
1991	21,374	14,200	2,954	331	1,356	2,533
1992	23,507	15,661	3,205	358	1,514	2,769
1993	25,346	17,060	3,344	380	1,592	2,970
1994	27,660	18,899	3,569	392	1,691	3,109
1995	30,295	20,831	3,841	423	1,794	3,406
1996	33,786	23,252	4,204	449	2,031	3,850
1997	37,332	25,729	4,672	484	2,343	4,104
1998	41,368	28,642	5,138	538	2,536	4,514
1999	44,875	31,328	5,556	540	2,554	4,897
2000	48,857	34,118	6,143	562	2,715	5,319
2001	54,991	38,556	7,058	634	2,948	5,795
2002	58,924	41,581	7,613	635	2,974	6,121
2003	67,007	47,519	8,599	721	3,492	6,676
2004	72,718	51,922	9,451	768	3,749	6,828
2005	81,499	58,799	10,320	892	4,031	7,457
2006	89,618	64,743	11,526	992	4,436	7,921
2007	96,707	69,129	12,649	1,350	5,119	8,460
2008	1,05,353	75,336	13,950	1,427	5,601	9,039
2009	1,14,951	82,402	15,313	1,486	6,041	9,710
2010	1,27,746	91,598	17,109	1,527	6,432	11,080
2011	1,41,866	1,01,865	19,231	1,604	7,064	12,102
2012	1,59,491	1,15,419	21,568	1,677	7,658	13,169
2013	1,82,445	1,32,550	24,853	1,894	8,597	14,551
*: 'Two-wheelers' include auto-rickshaws for the years ending 31st March 1959, 1960,
1962, 1963, 1964, 1965, 1967, 1968 and 1969. For the remaining years,
auto-rickshaws are included in 'Others'.
** : Others include tractors, trailers, three wheelers (passenger vehicles)
/LMV and other miscellaneous vehicles for which category-wise break up
is not reported by State/UT.
@ : Includes omni buses since 2001. Totals may not tally due to rounding off of data.
Source: Offices of State Transport Commissioners/UT Administrations.

 

2.6       Two wheelers: The total number of registered two wheelers increased at a rate of 14.8 % during 2012-13 to reach the figure of 1325.5 lakhs as on 31st March, 2013. The detail figures are depicted in table no. 1.1.

2.7       Cars, Jeeps and Taxis: The number of registered cars, jeeps and taxis rose by 15.2% during the financial year 2012-13. The total number of cars, jeeps and taxis increased from 215.7 lakhs during the period ending 31st March 2012 and stood at 248.5 lakhs as on 31^st March 2013.

2.8       Buses: The number of registered buses, including omni buses, increased by 12.9% during 2012-13. There were 18.9 lakhs buses, including omni buses, as on 31st March 2013.

2.9       Goods Vehicles: Goods Vehicles includes multi-axled/articulated, trucks & lorries and light motor vehicles (Goods). The number of registered goods vehicles recorded a growth rate of 12.3 % during 2012-13. As on 31st March 2013, there were 86.0 lakh goods vehicles.

2.10     Other Vehicles: Other vehicles include tractors, trailers, three-wheelers (passenger vehicles/LMVs) and other miscellaneous vehicles which are not classified separately. The combined growth of these vehicles together during 2012-13 was 10.5%. There were 145.5 lakhs other vehicles as on 31st March 2013.

 

3. State -wise Distribution of Registered Motor Vehicle Population in India

3.1       Out of total 1824.45 lakh registered motor vehicles in India, the State of Maharashtra accounted for the largest share (11.8%) of the total registered motor vehicles in the country (Chart-4) followed by Tamil Nadu (10.5%), Uttar Pradesh (9.3%), Gujarat (8.6%) and Andhra Pradesh (7.0%). These five States together accounted for 47.2% of the total vehicles registered upto 31st March, 2013. The lowest number of motor vehicles (0.11 lakh) was registered in the UT of Lakshadweep with a share of 0.01% in the total registered motor vehicles in the country. Among the States, Sikkim reported the lowest number of the total registered vehicles of 0.36 lakh with a share of 0.02% in the total registered motor vehicles in the country.

 

Chart-4 : Registered Motor Vehicles (in thousand)

 

 

3.2       In terms of growth (CAGR) of registered motor vehicles, there was a wide range of variation amongst the States/UTs. While the highest CAGR for registered vehicles during 2003-2013 was recorded by Tripura (14%), followed by Mizoram (12.6%), and Himachal Pradesh (12.5%), the lowest CAGRs were recorded by Nagaland (6.7%), Delhi and Chandigarh (7.0%).

The States / UTs wise CAGR during 2003-2013 is given in (Table 4) below-

Table - 4 : State / UTs wise CAGR (Compound Annual Growth Rate) of Registered Motor Vehicles : 2003 – 2013
Sl No	States / UTs	Growth %
1	Tripura	14.0
2	Mizoram	12.6
3	Himachal Pradesh	12.5
4	Karnataka	12.4
5	Bihar	12.4
6	Uttarakhand	12.3
7	Chhattisgarh	12.3
8	Jharkhand	12.0
9	Odisha	12.0
10	Kerala	11.9
11	Andaman & Nicobar Islands	11.8
12	Manipur	11.8
13	Dadra & Nagar Haveli	11.7
14	Meghalaya	11.7
15	Haryana	11.2
16	Rajasthan	11.2
17	Uttar Pradesh	11.1
18	Assam	11.1
19	Maharashtra	10.2
20	West Bengal	10.0
21	Jammu & Kashmir	9.8
22	Andhra Pradesh	9.8
23	Madhya Pradesh	9.7
24	Gujarat	9.3
25	Sikkim	9.2
26	Tamil Nadu	9.2
27	Pondicherry	9.1
28	Goa	9.0
29	Lakshadweep	8.3
30	Daman & Diu	7.6
31	Chandigarh	7.0
32	Delhi	7.0
33	Nagaland	6.7

4. City- wise Distribution of Vehicle Population in India

4.1       Amongst the 42 reported million-plus cities, during the period up to 31st March, 2013 with vehicles population of 534.7 lakhs, Delhi (77.9 lakhs) had the highest number of registered motor vehicles during 2012-13, followed by Bengaluru (45.9 lakhs), Chennai (40.7 lakhs), Pune (23.5 lakh), Greater Mumbai (21.9 lakhs) and Hyderabad (20.4 lakh), (Chart 5). These six cities accounted for 43.1% of the total registered vehicles of the reported million plus cities. Srinagar reported the lowest number of registered motor vehicles amongst reporting million plus cities in India.

Chart-5 : Registered Motor Vehicles in Million-plus Cities

4.2       Amongst the top six cities in terms of the number of registered motor vehicles, the highest CAGR of 12.9 % was recorded by Pune during 2003-2013. The select million-plus cities which recorded more than 10% CAGR during 2003-2013 is given in (Table 5) below-

Table 5 : CAGR of Registered Motor Vehicles in Selected Million-Plus Cities : 2003-2013
Million Plus Cities	CAGR (in %)	Million Plus Cities	CAGR (in %)
Pune	12.9	Coimbatore	10.2
Kochi	12.7	Jaipur	10.0
Madurai	10.6	Bengaluru	10.0
Kanpur	10.4
Source : Office of State Transport Commissioners / UT Administrations

 

 

5. Structure of Motor Vehicle Taxation in India

The Seventh Schedule of the Constitution of India confers the right of levying taxes on goods and passengers carried by road on the States. States have exclusive powers to levy passenger and goods tax but their power to tax motor vehicles is subject to the general regulatory provisions of Central laws on the subject. At present, the tax rate across the States/Union Territories (UTs) on motor vehicles varies from 2% to 18%. The existing structure of tax on motor vehicles with respect to two-wheelers, cars, passenger vehicles and goods is given below:

5.1       Most of the States have switched over to life time tax (LTT) except for a few like Odisha, the North Eastern States (Manipur, Mizoram, Sikkim & Tripura) and UTs of Andaman & Nicobar, Dadra & Nagar Haveli, Daman & Diu and Pondicherry in respect of two-wheelers. In some States, tax slabs for LTT for two-wheelers are based on engine capacity (Himachal, Jammu & Kashmir, Rajasthan and West Bengal); in some it is the unladen weight (Assam, Madhya Pradesh, Meghalaya and Odisha). Other States/UTs follow life time tax based on purely the value/cost of the vehicle (Andhra Pradesh, Bihar, Jharkhand, Chandigarh, Chhattisgarh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Tamil Nadu and Uttar Pradesh).

5.2       In the case of cars, some of the States/UTs which follow engine capacities are J&K, Sikkim, West Bengal and while Kerala, Madhya Pradesh, Pondicherry, Daman & Diu follow unladen weight as the basis. In Himachal Pradesh the basis of MVT is engine capacity in conjunction with the percentage of cost of vehicle. States like Jharkhand follow the basis of seating capacity. However, most of the States/UTs now follow life time tax based on the value / cost of the vehicle (Andhra Pradesh, Assam, Bihar, Chandigarh, Chhattisgarh, Delhi, Goa, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Nagaland, Odisha, Punjab, Rajasthan, Telengana, Tamil Nadu, Tripura, Uttarakhand and Uttar Pradesh). The taxes are annually in the state of Mizoram.

5.3       In the case of passenger transport vehicles like stage or contract carriages, the seating capacity forms the basis for levying tax. Motor vehicle taxation of passenger buses is mainly on the basis of an upper seating capacity limit (per seat per quarter/annum) and treated differently from motor cars and jeeps. In many States differentiation in tax treatment of passenger buses is also accorded on the basis of type of service (Ordinary/Luxury/Express etc). Some States, for example, Andhra Pradesh, Chhattisgarh, Madhya Pradesh and Odisha also include the distance that the vehicle is permitted to ply as an additional element for determining the quantum of tax. In some States routes are divided into different categories in terms of region with a different rate of tax for each, e.g. in Andhra Pradesh (based on moffusil versus town) and Maharashtra (based on city versus rural areas). Another distinction particular to the taxation of commercial passenger vehicles is that between stage carriages and contract carriages.

5.4       Goods vehicles are almost always taxed on the basis of the registered laden weight (RLW) or gross vehicle weight (GVW) or unladen weight (ULW). For goods vehicles, in most of the States, the basis for taxation is registered laden weight (RLW)/gross vehicle weight (GVW). As far as tax on goods vehicle is concerned, the de facto tax rate everywhere is a specific rate calculated on the basis of ULW, GVW/RLW or Payload.

 

Broad Conclusions

Despite good performance of the road transport sector it is beset with slow technological development, low energy efficiency, pollution and slow movement of freight and passenger traffic.  The step-up in freight and passenger road traffic during the Eleventh Plan in consonance with alternate growth paths provides an opportunity for technological up gradation, capacity augmentation and replacement of over aged rolling stock.

Review of existing arrangements for data collection for road traffic taxes/fees

            Motor Vehicles Act provides for maintenance of State registers of motor vehicles.  The system of vehicle registration in the country needs to be modernized.  The present system of vehicle registration is characterized by:

a)    Decentralized nature of vehicle registration through around 760 Regional Transport Officers (RTOs)

b)    Different systems and standards for compilation of vehicle registration across the country. Presently a little more than one-sixth (about 125 RTOs) of the total 760 RTOs in the country has been computerized.

c)    No centralized data warehouse/agency and related parameters.  Timely access and retrieval of information on vehicles registration difficult due to lack of centralized data system.

 

            Worldwide the data of motor vehicles is in terms of “Vehicles in use” rather than the number of registered motor vehicles as is the practice in India. There is complete lack of regular and reliable data on freight movement, passenger movement on private buses, trucking industry; transaction costs involved in inter state movement of goods and passengers etc.

Suggestions for data improvement

To overcome the data infirmities following are suggested.

a)    Make vehicle registration system IT based; create centralized registry/depository of all motor vehicle registrations in terms of unique identity (similar to PAN) detailing vehicle characteristics, details of permit, etc to facilitate quick retrieval and policy analysis.

b)    State Transport Authorities need to collect information on motor vehicles in terms of tax paying and non tax paying so as to generate motorized ‘Vehicle in Use’.

c)    Carry out quinquennium (a specified period of five years) surveys under the aegis of NSSO covering following dimensions :

                      i.        Freight movement by Road: origin, destination, size, type of freight and its movement by type of vehicle and age.

                     ii.        Passenger movement by Road:  Passenger movement and related parameters by private bus operators need to be captured.

                    iii.        Trucking Industry: survey of domestic trucking fleet covering operating cost, financing, vehicle technology, vintage, turnaround time, utilization etc

                   iv.        Time Motion Surveys: To assess time spent on various activities related to documents compliances / clearances at barriers to ascertain transaction cost faced by road freight / passenger industries.

Barriers to Road Transport

            Barrier free movement of passenger and freight by road across the country is vital for promoting efficient economic development and growth.  A goods vehicle in India is answerable to all the checkpoints and traverses under conditions which are not ideal, leading to lower speeds and low utilization of rolling stock.  This makes seamless flow of freight traffic across the India difficult.

            A typical truck operator has to normally face seven different agencies for either obtaining clearances for carrying goods or paying certain charges at the check post.  These agencies are mainly: 1.Sales Tax, 2.Regional Transport Officer (RTO) 3.Excise, 4.Forest, 5.Regulated Market Committee, 6.Civil Supplies (for check on the movement of essential commodities, black marketing, weights and measures, food adulteration) and 7.Geology and Mining.  These checks are generally conducted by respective agencies at separate points, resulting in more than one detention. Detention of vehicles causes lower speed, loss of time, high fuel consumption and idling of vehicles, leading to under-utilization of transport capacity and adversely affecting their operational viability. Besides, it imposes economy wide costs which are not easy to assess. Better roads and faster speeds may be offset by Inter State Check Posts (ISCPs). The system in vogue hinders rather than facilitates smooth flow of freight and passenger movement across the country and has thwarted the formation of single common market.

            Further Road transport sector is subject to myriad of levies/taxes (both Centre and State) with no provision of set-offs in case of many taxes/levies, leading to cost and price escalation which erodes competitiveness of domestically produced manufactures. Replacement of State Sales tax by State VAT has not reduced or removed the need for border check posts. Under State VAT regime, documentation checking is more important than the physical check. Major drawbacks in State VAT are (i)It does not provide tax credit for the inter state movement of good; (ii)Document compliance at the check post is no different from the past;(iii)Institution of check posts remains and (iv) octroi (a duty levied in some countries on various goods entering a town or city ) is not dispensed with.

            The time consumed at check posts under the current regime might be the same as that observed under the previous sales tax regime unless documentation procedures are simplified and instead of manual verification electronic checking is undertaken. Key to successful administration of State VAT lies in setting up of a national level IT architecture for tax payer identification, creating and maintaining data base of dealers and their transactions. The system of levy of penalty and collection remains the same as in the earlier sales tax regime. In a situation where CST is dispensed with in a phased manner over the medium term the requirement for a Sales Tax Check Post would be greatly reduced.

            Essentially the checks made at border posts aim to ensure that (a)Taxes in the state of destination have been paid on the goods being carried ;(b)Trucks are not overloaded ;(c)Trucks are being operated safely and (d)Trucks are carrying valid papers. The impact of various laws governing inters state movement of goods/passenger is accentuated by existing system marked by manual and segregated sales tax administration, vehicle registration  and driving license records and regulatory and inspection functions still fully carried out by Government agencies.

Multiplicity of Laws

            Multiple laws and agencies governing inter-state movement of goods and vehicles are major impediments.  Following is the list of applicable Laws governing movement of vehicles and freight across the country:

 1         Laws Governing Access Control to National Highways: (i) National Highways Act, 1956;(ii)National Highways Rules, 1957; (iii)The National Highways Authority of India, 1988;(iv)National Highways (Land and Traffic) Act, 2002  and (v)Highways Administration Rules, 2003.

2          Laws Governing Inter-state movement of goods(i)Central Sales Tax Act, 1956 ;(ii)Various State Sales Act/State VAT and (iii)Various Local/Municipal Acts governing Octroi and Entry Tax

3          Laws Governing Inter-state movement of Vehicles (i) The Motor Vehicle Act (MVA), 1988 ;(ii)The Central Motor Vehicle Rules (CMVR), 1989 (Amended in 1994, 2000 and in 2002) and;(iii)Various State Motor Vehicles Act, 1989. The various sections/provisions of MVA relate to regulation of safety/quality, axle load, emissions, etc.

Barriers to Inter-State Freight Movement

Regulatory Regime for Goods

            The regulatory regime for goods is more complex than regulating trucking operations.    The regulatory regime for goods is commodity and location specific.    In the event of any missing link in the multiple commodity carriers, detention of the carrier is inevitable. The Centre, along with State Governments, is empowered to enact laws pertaining to goods.  Some of the regulations governing movement of goods across States are: Essential Commodities Act, 1955 with its emphasis on distribution rather than facilitating supplies; Indian Forests Act, 1927 which empowers the Union and State Governments to make laws and regulations to regulate transit of timber and other forest produce; cumbersome dispute resolution and both transport-specific and commodity-specific fiscal regime. 

 Cost of Check posts on inter state trade

            Check Posts imposes the following economic costs: (a)Surveillance and enforcement costs (operational cost); (b)Cost of Compliance (time related VOC and cargo holding costs) and (c)Cost of Externalities (congestion at check posts imposes cost on other vehicular traffic leading to loss of time distance related VOC and value of Travel Time on the passenger vehicles).

            The enormous economic cost imposed by the check post system has been vividly brought out in Grand Trunk Road Improvement Project (GTRIP, 2006). It shows that the present check post system leads to delays in road freight movement.  The economic cost of such delay is estimated at a minimum of Rs. 3,200 Crore and a maximum of Rs. 4,300 Crore for the year 2004 which  progressively goes up to Rs 60,168 crore by 2017.  With one Billion people in India, annual economic loss on account of the check post system is Rs. 32 per capita, at the minimum in 2004.

Suggestions and Recommendations towards barrier free freight and Passenger movement

(I) Measures to promote seamless freight and passenger movement across states

a)    Integrate Tax Administration with inter state road freight and passenger movement through online communication network system at national, regional and local level.

b)    Adopt concept of “Green Channel” for single destination container cargo.  Initially high value freight and sensitive commodities could be brought under its ambit.

c)    Adopt “Single Window Clearance System” for all authorized charges/clearances both at origin and at check post.

d)    Abolish requirement of a transit pass.

e)    Abolish octroi / entry tax.

(II) Suggestions Relating to Movement of Goods Vehicles

a)    The color of truck number plate of inter state vehicles should be different from the intra state vehicles.  This will help segregate goods vehicle and reduce the intermediate checking of inter state freight movement.

b)    For enhancing inter state road transport efficiency following amendments to existing MV Act are suggested.  (1) Rule 88 of the MV Rules, 1989, Sub rule (2) for encouraging the use of MAV upto 20 years.  2. Repealing Section 158 of MVA for limiting police powers for checking vehicle documents without the preliminary requirement at Commission of any offence.

c)    Introduce National permit system which does not require any endorsement by States.  The revenue can be shared by all concerned states.

 (III) Suggestions relating to taxation of inter state freight movement

a)    Replace various road transport related taxes/levies (road tax, goods tax, passenger tax) etc. by a single composite tax.  These will both reduce collection cost and compliance cost of vehicle owners/operators;

b)    Phase out Central Sales Tax;

Provide tax credit for the inter-state movement of goods under State VAT.

Motor Vehicle Taxation

            Taxation of road transport has two purposes: to charge users for the costs they impose on the road system and on other users (marginal costs) and to raise revenues for the government (pure taxation).

The existing tax structure for commercial vehicles shows wide variations among States.  There are different bases for computation and different rates, leading to differing incidence of taxes per vehicle in different States.  In fact, it is difficult to make comparisons of rates levied on different types of vehicles across States due:(i) different classification principles for the taxation of vehicles in different States;(ii) variations in the application of ‘lifetime’ and annual tax rates to vehicle categories(iii) use of specific and ad valorem rates and;(iv) multiplicity of rates. Inter-State comparisons are thus somewhat difficult.

Revenue significance of Motor Vehicle Taxes and Check Posts

• The share of Motor Vehicle Tax (MVT) in total tax revenue of the States has risen from 3.8 per cent in 1993-94 to 4.5 per cent in 2003-04.

 

• During the decade (1993-94 to 2003-04) MVT has grown at a faster compound annual growth rate of 14.7 percent compared to 13.4 per cent and 11 per cent growth in sales tax and passenger and goods tax respectively.

 

• According to study carried out by GTRIP (Grand Trunk Road Improvement Project) Sales Tax Departments’ check posts accounted for less than 1% of the revenues of the States in 2002-03.

 

• Check posts of the Transport Department accounted for about 5% of the revenue of State in 2002-03.

 

Despite its low contribution towards tax generation and the economic costs it imposes, the institution of check posts has remained firm.  There is need to consider the necessity of check posts from a larger perspective of national cost benefit rather than narrow consideration of revenue generation.

Suggestions Relating To Improvement of Motor Vehicle Taxation

1. It would be desirable to move towards advalorem (according to value VAT) taxation for motor vehicles in the interest of administrative simplicity, revenue buoyancy and in incidence.  However, this may result in higher burden on MAV (Multi Activity Vehicle) that ought to be tax lightly vis-à-vis two axle trucks.  This impact could be cushioned by according a concessional excise duty structure for MAV and articulated vehicles.
2. Keeping in view the road damage factor there is needed to move vehicle taxation of goods vehicles in particular from gross vehicle weight to axle loads.  The latter bears a close relation with road damage and will also encourage use of MAV.
3. Adopt simple motor vehicle taxation structure for stage carriages as per the seating capacity.
4. To facilitate free movement across states of personalized vehicles which are on “lifetime tax”, those which have paid taxes in one state could be treated as tax exempt by others. 
5. Tax benefits should be extended only to vehicles specifically put to use for charitable purposes and not on ownership basis.

 

Emission / Pollution Control

Suggestions for Emission / Pollution Control

Keeping in view the proposed introduction of BS-IV emission norms there is need for clear and long term road map for facilitating smooth transition to higher emission norms.  This calls for:

a)    Well defined road map of transition to alternative fuels to facilitate technology up gradation;

b)    Appropriate time lag between each successive stage of emission norms;

c)    Modernize pollution control so as to reduce manual intervention, facilitate storage and retrieval of data for policy analysis and;

d)    Make inspection and certification mandatory of all motor vehicles and compulsory retirement of vehicles which do not obtain road worthiness certificate.

Research & Development to improve vehicle efficiency

Suggestions for R&D to improve vehicle efficiency

R&D efforts should focus on following aspects:

a)    Futuristic Bus Body Design with emphasis on energy conservation and eco friendly material;

b)    Propulsion technology for use of hybrid cells, bio fuels, alternate energy;

c)    Development of appropriate transmission systems suitable for urban driving condition and;

d)    Create a fund with a provision of Rs. 100 crore dedicated for R&D effort in the Road Transport Sector during the 11^th Plan.

Fleet Modernization

Suggestions to promote fleet modernization

Urgent need to modernize vehicles (mainly goods carriages) in use in the interest of environmental protection, fuel economy, safety and lower running costs.  This would require putting in place a mechanism to encourage owners of over aged vehicles (beyond a certain cut off date) to surrender their vehicles in exchange for new or younger vehicles. To facilitate this process, a Special Purpose Vehicle with fixed life need to be created to provide wherewithal along with a package of fiscal incentives to incentivize the process.