Webinar on Taxes and public bus transport: The Indian paradox
byAloke Mukherjee
This webinar was hosted on the 12th of October, from 2:30 PM to 3:30 PM (IST), and featured Aloke Mukherjee in discussion with Dr. Ekroop Caur (IAS), Secretary to Government (Expenditure), Finance Department, Government of Karnataka.
Public transport performs valuable social and economic functions, such as providing increased mobility for low-income groups, and reducing congestion in dense urban areas. Across the world, public transport is treated as a public good and is often subsidised to offset the gap between costs and revenues. Tax exemptions and rebates form an important part of this subsidy.
In India, the bulk of public transport is bus-based and provided by government entities known as State Transport Undertakings (STUs). Paradoxically, the current tax policy for STUs treats them as commercial entities, effectively taxing them at higher rates than private vehicle users. This implicitly subsidises private vehicles by not discouraging vehicle purchase and usage. Meanwhile, themultiplicity of taxes (as many as 13) and high tax rates on STUs also leaves them with perennial funding shortfalls, which reflects in the levels of service and safety, and further incentivises private vehicle usage.
This webinar provided an overview of current distortions in the taxation and funding of bus operators in India, and examine the alternatives that could exist. As previous Managing Director of Bengaluru Metropolitan Transport Corproation (BMTC), Dr. Caur had several insights to offer:
- Taxes alone cannot account for poor financial position of public bus operators. However, the combination of high taxation and increases in other input costs have significant impacted operator-led efforts to improve bus systems or enhance fleet in recent years.
- While the government has recognized the importance of good public bus transport in urban mobility, this has yet to reflect in taxation policies for public bes services across states. As most taces on bus-based public transport are levied at the state level, the Union Government should ideally come out with a set of guidelines on motor vehicle taxation for states to consider.
- At the outset, states should look at rationalizaing motor vehicle tax structures such that buses are not taxed at higher rates than private vehicles, which implicitly subsidizes car and two-wheeler use, promoting congestion.
- The capital-intensive nature of metro rail projects in India (especially in the construction phase) does necessitate substantial government support. As metro rail networks mature in the country, the extent of support provided by the government will likely decline. However, it is neccesary to ensure that investment on metro rail projects do not 'crowd out' investments in other public transport systems, especially bus systems.
- Operators often lack a clear understanding of their own tax liabilities. A thorough audit of these liabilities, followed by a data-driven proposal to the state government, is more likely to succeed in gaining financial support from the relevant state government, given the numerous competing demands from other sectors for government financial assistance.
To view the webinar presentation, click here.
To view the webinar recording, click here.