KARACHI, May 13: The Sindh government is all set to introduce a ‘road usage charge’ in place of motor vehicle tax in the next budget and is in consultation with the federal government to get it enforced as a uniform tax in all the four provinces.

“Prime Minister Shaukat Aziz has agreed on the enforcement of road usage charge in place of motor vehicle tax,” M.A. Jalil, Sindh government adviser on excise and taxation, informed Dawn on Thursday.

He disclosed that the collection and payment rules for road usage charge had been prepared and finalized. These may be put in place once the Sindh Assembly gives an approval to the budget.

A senior auditor, Najam I. Chaudhry of A.F. Ferguson, had drafted the road usage charge about five years ago and had proposed its introduction in place of motor vehicle tax in 1999. But a wizard bureaucrat in the federal petroleum and natural resources ministry had then managed to stop it on the plea that petrol and fuel are the federal subjects and any levy in the name of petrol and fuel does not come under the provincial jurisdiction.

The proposal has been revived again and discussed in various forums and at different levels and is finally being taken up in Sindh for inclusion in the next budget. Under this system, oil companies will become the collector of road tax to be charged on a unit of fuel be it petroleum, diesel, compressed natural gas or high octane blending. The tax will be collected at petrol and gas pumps with payment of gas and oil at a prescribed rate.

Initially a rate of Rs0.50 per litre is proposed for motor gasoline and high octane blending component. The same rate is also proposed for per cubic meter of compressed natural gas. The rate for per litre high speed diesel oil has been proposed at Rs0.30. “But these rates are subject to change and debate in the Sindh Assembly,” the adviser informed.

The oil distribution companies are expected to be given 0.25 per cent of the total collection as their fee. At present the rates of motor vehicle tax vary with the size, capacity and the nature of use of the vehicle. Small automobiles and two-wheelers carry low rate of tax, but an automobile with high engine power and those in commercial use are levied high rate of tax.

But the tax payment procedure is too cumbersome and discourages the owners from making prompt payment. With more than six million vehicles on the road, the bulk being in Sindh, particularly in Karachi, a big number of automobile owners prefer to operate without paying taxes.

This tax is considered to be rational as it is linked with the road usage. Those automobiles that travel more on roads will consume more fuel and hence pay more tax.

The oil marketing companies would account for road usage charge collected on behalf of the excise and taxation department of the respective province by depositing the same into their respective heads of account with the State Bank each month. Way back in 1999-2000, the experts estimated petrol consumption in Sindh at 600 million litres and diesel at 1.73 billion litres. At Rs0.30 per litre, the diesel was expected to give a total recovery of Rs519 million and the petrol at Rs0.50 a litre would have generated Rs300 million. Total recovery from road usage tax was Rs819 million against the budgetary projection for motor vehicle tax at Rs637 million.

In the year 1999-2000, the total collection of motor vehicle tax in all the four provinces and Azad Kashmir as projected by the budget documents stood at Rs1.58 billion. But the road usage tax based on an anticipated more than 9 billion litres of petrol and diesel was calculated at Rs3.11 billion.

In the current fiscal year when Karachi roads are swarmed with a large number of automobile cars and two-wheelers thanks to generous loaning by the banks and leasing companies, total recovery from motor vehicle tax is estimated at Rs1.6 billion. The road tax potential is Rs3 billion plus.

Mr Chaudhry is said to have revived his proposal about a year ago and has also proposed revamping of the vehicle registration numbering scheme (VRNS) on a long-term and countrywide basis. “The VRNS should be such that by just looking at the number, one should be able to decipher the registration code,” he told the Sindh government in an official communication.

He suggested that the scheme should be uniform across the country and “computer friendly” to facilitate its computerization throughout the country. He claims that his scheme was simple and could be adopted in Sindh to begin with the registration of new cars.