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Finance Ministry considers lowering duty on buses

Jyoti Mukul & Vrishti Beniwal  |  New Delhi 

Even as the finance ministry is looking at exiting stimulus measures, it is considering a proposal for lowering the excise duty on buses from the present level of 8 per cent.

The Ministry of Urban Development has asked the finance ministry to lower the duty in order to promote the public transportation system in the country.

A senior official told Business Standard that the proposal has been made to strengthen city transportation and promote a more environment-friendly way of commuting.

“Though the duty on bus is at 8 per cent, we want that the Ministry of Finance should further bring it down,” said the official.

The urban development ministry had last year too proposed that buses meant for urban transport with a minimum seating capacity of 20 be exempted from value added tax and central excise duty to help restore economic growth.

The demand had not found any takers in the finance ministry at that time because the government had provided stimulus to the industry earlier in the year, by sanctioning 15,000 buses for urban transport in 61 cities.

Besides, it had reduced excise duty on buses from 16 per cent to 12 per cent and further to 8 per cent as part of the stimulus measures to boost the economy.

This time also, it would be difficult for the government given the condition of its finances. The stimulus packages are projected to widen the fiscal deficit to 6.8 of the gross domestic product this financial year.

“Any further duty cut will lead to loss of revenue to the government. Though the revenue loss will not be substantial, if we give relief to one section, others will also ask for it. It will be better to enhance the allocation for the segment rather than reducing the duty further. Moreover, the auto industry is recovering now and it does not need further stimulus,” said a finance ministry official.

The urban development ministry has also proposed more than three-fold increase in Gross Budgetary Support (GBS) for its plan outlay for 2010-11. In its proposal to the Planning Commission, it has sought Rs 10,858 crore as against Rs 3,060 crore allotted to it under the Budget 2009-10. The demand is more than the Rs 10,610 crore it had been given in the first three years of the Eleventh Five-Year Plan period (2007-12). The residual GBS available for the remaining two years (2010-12) is Rs 1,833 crore.

“The increase in GBS demand is mainly on account of greater spending expected primarily on account of the Jawaharlal Nehru National Urban Renewal Mission,” said an urban development ministry official.

First Published: Wed, January 27 2010. 00:08 IST