SINGAPORE - In line with moving diesel taxation to the pumps to encourage responsible usage, Finance Minister Heng Swee Keat announced on Monday (Feb 18) that the excise duty on the fuel will be raised from 10 cents to 20 cents a litre with immediate effect.

At the same time, upfront taxes for diesel vehicles will be pared down further from where they were when diesel duty was first reintroduced at the pumps in 2017.

The annual Special Tax for diesel cars and taxis will be reduced further by $100 and $850 respectively from Feb 18 this year. Two years ago, they were reduced by the same quantums.

For instance, an owner of a Euro 5 1.6-litre diesel car, who pays an annual Special Tax of $540, will now pay $440 a year. And a fleet owner of a diesel taxi which currently pays $4,250 per year will now pay $3,400.

These may not fully offset the excise duty at the pumps.

Mr Heng explained: "Diesel exhaust is highly pollutive, and adversely affects our people's health and quality of life.

"Many cities in Europe have announced restrictions on diesel vehicle usage. We have also taken steps to discourage diesel consumption."

Owners of private diesel buses and goods vehicles will be granted new road tax rebates for a three-year period from Aug 1 this year to July 31, 2022.

A 100 per cent road tax rebate will be granted in the first year, followed by 75 per cent in the second year, and 50 per cent in the third year. The new road tax rebate of 100 per cent will apply for the period from Aug 1 this year to July 31, 2020.

Diesel school buses, and eligible diesel private-hire or excursion buses that ferry school children will receive additional cash rebates for the same three-year period.

It will be up to $1,800 for eligible diesel private-hire or excursion buses, and $1,600 for school buses.

Over three years, Minister Heng said diesel buses ferrying school children will receive as much as $3,200 in cash rebates.

Ms Tammy Tan, spokesman for ComfortDelGro Corp, which has one of the largest diesel fleets here, said: "We will be passing on the entire savings resulting from the reduction in the annual Special Tax for diesel taxis to our drivers."

The savings will help offset a foreseeable increase in running cost.

Taxi drivers and private-hire drivers using diesel vehicles will incur around $1,000 more a year if their driving patterns do no change.

This is based on an average daily mileage of 300km and a fuel efficiency of 10km per litre.

A private bus operator will incur around $2,000 more per full-size bus per year, based on an average mileage of 140km per day and a fuel efficiency of 2.5km per litre.

At 20 cents per litre, the duty on diesel is still less than half that for petrol.

Correction note: An earlier version of the story said the annual Special Tax for diesel cars and taxis will be reduced from Feb 20. This is incorrect. The date should be Feb 18. We are sorry for the error.