Pollution taxation

Currently there is no tax that is enforced for pollution in India. An Environment Compensation Charge was implemented by the National Green Tribunal to curb the increasing automobile emissions in New Delhi. ECC is imposed only on commercial vehicles.

What is Pollution Tax?

Pollution tax is a tax leived to person one who pollute or damage the environment. The main aim of this tax is to reduce environmental harm.

Pollution Levels in India

According to a WHO report, India has 13 out of the 20 most polluted cities in the world. It is important to note that China is in an unenviable position of being the world’s largest carbon emitter at 8320 MT followed by US at 5610 MT and India at 5164 MT. According to the report, Delhi is the most polluted city in India based on various parameters such as levels of nitrogen oxide, sulphur dioxide and particulate matter. The levels of particulate matter pollution* across various cities in India are listed the table below:


Pollution level (particulate matter - ug/m3)









*yearly average

Sources and Effects of Air Pollution

There are various sources of air pollution in India such as vehicular pollution, dust, biomass and diesel gensets among others. The number of acute respiratory infection (ARI) cases in India is commonly attributed to rising air pollution in the country. Around 3.5 million cases of acute respiratory infection (ARI) were reported in 2014, according to the National Health Profile. According to WHO estimates, India has the highest number of reported deaths from respiratory ailments.

Pollution Tax/Environment Compensation Charge

There is no nation-wide pollution tax currently being enforced in India. The National Green Tribunal (NGT) initiated an Environment Compensation Charge (ECC) to rein the rising automobile emissions in New Delhi. Backing the NGT, the Supreme Court, in October 2015, passed an order on levying of ECC on light commercial vehicles (Rs.700) and three-axle vehicles (Rs. 1,300). According to reports, emissions from trucks account for over 1/3rd of air pollution in New Delhi given that around 40,000 trucks ply in Delhi on a daily basis while around 13,000 use the capital city as a transit route. Commercial vehicles which enter the city of Delhi are responsible for 22% of nitrogen oxide and 30% of particulate matter, according to a study by Centre for Science and Environment.

Intriguingly, 40-60% of heavy trucks and 23% of commercial vehicles enter Delhi to save on toll charges. The Environment Compensation Charge is levied on heavy duty commercial vehicles and not on private cars. Also, vehicles which carry essential commodities such as oil and food articles and ambulances do not have to pay the Environment Compensation Charge. The toll operators (at 127 entry points to the capital city from Uttar Pradesh, Rajasthan and Haryana) who are responsible for collecting ECC every Friday, hand over the amount to the government of Delhi.

Carbon Tax

The Environment Compensation Charge is the second most important anti-pollution directive of the Supreme Court of India for boosting the ambient quality in Delhi. In 1998, the apex court directed the buses, trucks, auto-rickshaws and taxis to opt for CNG fuel. In a move which according to some observers marks a significant change - from carbon subsidisation to carbon taxation, the government of India introduced a carbon tax in July 2010. A tax of Rs.50 was imposed on one metric tonne of coal - imported and produced, in the country. In 2014 budget, the finance Minister raised the carbon tax to Rs.100 per metric tonne while budget 2015-16 further increased the carbon tax to Rs.200 per metric tonne.

According to climate change analysts, the move to impose carbon tax on fossil fuels in India is an attempt to rein in carbon emissions (burning petrol coal and diesel) and thereby, send out a strong message to developed nations which have been putting pressure on developing nations to take proactive measures on curbing CO2 emissions. According to analysts, India currently levies a carbon tax of USD 140 and USD 64 per tonne on petrol and diesel respectively.

On coal, finance minister Arun Jaitley, in his budget speech of 2015-16, said: “here’s a need to find a balance between taxing pollution and the price of power.” The cess on coal mined within the country and imported is expected to boost the efficiency of coal-based power plants. There is a view that excise duty on petrol and diesel also act as an implicit carbon tax.

Advantages and Disadvantages of Carbon Tax and Environment Compensation Charge

Notwithstanding the introduction of the carbon tax and Environment Compensation Charge, many commentators believe that India has a long way to go in terms of coal and petroleum pricing structures which have to move in tandem with developments in the country’s ambitious solar power programme. Tax on carbon will induce firms/plants to push for green production processes in addition to raising revenue which can be used to promote environment-friendly initiatives. However, there is a view that industrial units may shift to countries with lower or no carbon taxes. It remains to be seen how the said taxes bring about the required changes in terms of improving the air quality and lesser polluted cities and towns.


Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

This Page is BLOCKED as it is using Iframes.