Ministry seeks duty waiver on states' bus procurement

The Union urban development ministry has sought excise duty exemption on buses purchased by state transport undertakings (STUs) for urban transport.

The rationale being money saved would bring down the cost of purchase, enabling the cash-strapped STUs to buy more buses. At present, commercial vehicles attract 8 per cent excise duty.

At a recent meeting of the ministry representatives with Finance Minister Pranab Mukherjee and his Budget team, the proposal to bring down the excise rate was discussed.

“We have sought excise concession from the Centre. The states must also reciprocate in a positive way,” said a top urban development ministry official.

If implemented, it would also benefit truck makers who have witnessed a 14 per cent dip in domestic sales in the first two months of current financial year 2009-10. In the last fiscal too, sales declined sharply.

To boost demand for truck makers and also to address urban transportation issue, the previous UPA government had announced partial funding for buses bought by the states under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).

The urban development ministry has so far sanctioned purchase of 14,695 buses under this scheme for the various states. The total expenditure of this project is estimated at Rs 4,000 crore, of which the Centre will provide Rs 2,000 crore as a one-time grant. The Centre has already released Rs 1,000 crore to the states on this account.

While the purchase of 14,695 buses has been approved, orders for only 7,815 buses have been placed so far by various states. Worried at this dismal response of the states and the stimulus package losing its objective, M Ramachandran, secretary of the urban development (UD) ministry, has shot a strong letter to the states last Thursday asking them to expedite the process of procuring the buses.