Top economic advisor questions subsidy on vehicle purchase

August 7th, 2008 - 10:49 pm ICT by IANS  

Chennai, Aug 7 (IANS) The central and state governments should not subsidise purchase of vehicles like cars and two-wheelers, according to the top economic advisor to the finance ministry. “It is not right for the government to offer subsidies for purchase of personal transport vehicles,” Arvind Virmani, chief economic advisor, department of economic affairs of the finance ministry, told the media on the sidelines of a seminar organised by the Confederation of Indian Industry (CII) here Thursday.

Of late several state governments have started refunding a portion of the cost of the vehicle and exempt payment of value added tax (VAT) on purchase of battery operated two/four-wheelers.

For instance, the Delhi government has offered a 15 percent subsidiy on the base price of an electric car in addition to 12.5 percent VAT exemption, refund of road tax and registration charges.

“The governments can subsidise development of public transport as in the case of Metro Rail projects,” he suggested.

“Instead of subsidising end-users, the governments can lend a helping hand for setting up pilot plants or other activities in the case of innovative products.”

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