A diesel duty was re-introduced at the pumps yesterday in a bid to encourage drivers and fleet owners to use the fuel more judiciously and, consequently, pollute the air less.
Finance Minister Heng Swee Keat announced a 10-cent-per-litre duty on automotive diesel, industrial diesel and the diesel component in biodiesel. It was effective yesterday, although fuel stations have not adjusted prices.
"Today, motor fuels such as petrol and compressed natural gas are taxed based on how much is used," he said. "This approach incentivises users to reduce consumption and manufacturers to develop more energy-efficient vehicles.
"However, for diesel, we levy a lump-sum special tax on diesel cars and taxis, regardless of the amount of diesel used."
In his Budget speech, Mr Heng said various cities are taking action to curb the ill effects of diesel usage, including banning diesel vehicles.
If the government wants a road map towards a greener, cleaner environment, the 10-cent duty is not enough to make people change their habits. I hope it is just a start.
MR NEO NAM HENG, chairman of diversified motor group Prime, on the re-introduction of diesel duty.
Observers said the eventual change will include GST and, hence, is likely to result in diesel pump prices rising by more than 10 cents a litre.
Duty on automotive diesel was removed in the aftermath of the Asian financial crisis in 1998 to help businesses weather the rough patch.
To soften the blow, the minister reduced the annual special tax on diesel cars and taxis by $100 and $850, respectively.
"In this way, we shift from an annual amount of tax to one which is related to usage," he noted. "The special tax reduction will offset the impact of diesel duty for the majority of drivers. I strongly urge taxi companies to pass on the special tax reduction to taxi drivers."
Yesterday, ComfortDelGro Corp, the largest taxi fleet operator here with more than 60 per cent market share, said it would pass the savings to its cabbies.
SMRT Taxis and Private Hire Services will also pass on savings to its cabbies, said its managing director, Mr Tony Heng.
"The introduction of eco-friendly taxi models, which account for nearly half of our fleet, has reduced SMRT Taxis' reliance on diesel fuel," he said.
Owners of private diesel buses and goods vehicles will also be granted road tax rebates for a three-year period from Aug 1.
For the first year, the rebate is 100 per cent, followed by a 75 per cent reduction in the second and 25 per cent cut in the third. The road tax savings amount to around $430 for a small van to nearly $3,000 for a very large trailer.
Diesel school buses and private-hire or excursion buses used to ferry schoolchildren will receive additional cash rebates for the same three-year period.
Commenting on the move to re-introduce diesel duty, Mr Neo Nam Heng, chairman of diversified motor group Prime, said: "If the government wants a road map towards a greener, cleaner environment, the 10-cent duty is not enough to make people change their habits.
"I hope it is just a start."