Sri Lanka Experience on Vehicle Taxation and Cleaner Fuel

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Sri Lanka Experience on Vehicle Taxation and Cleaner Fuel Chairman, National Transport Commission, Sri Lanka 1 The Anil Agrawal Dialog 2015 March 11 th, 12 th, 2015 Seminar theme on Multi-Faceted and layered issue of local-global action on Environment

2 Silent Features of Mobility Market in Sri Lanka A. Road Sector serves 94.8% of Passenger and 99% of Freight transport; B. Railways serves only 4.3% of Passenger km s and less than 0.8% of freight tonne km s in the Island (2014); C. The total fossil fuel consumption for mobility accounted US $ 2.813 billion in 2014; D. Current Active Vehicle Fleet has reached to 3.793 million (as at December 31 st, 2014); E. The total Passenger Trips per day recorded as 17.25 ( 413,915,258 PassengerKm s) million per day for all mode of transport

Present Characteristics of Road Use Vehicle Fleet Motor Cycles as at August 31 st, 2013 is 1.834 million and Three Wheelers are 691,597 (Petrol 655,535 Diesel 36,062); All four wheel road use vehicles as at August 31 st, 2013 is 903,182; This shows that 74% are two or three wheelers (20% Three Wheelers and 54% Motor Cycles); Government has implemented to get fuel efficient and less polluted fleet to the country by introducing tax benefits for Hybrid Electric technology and reducing age of used vehicle importation 3

Passenger Modal Share Passenger Km's 2008 2009 2010 2011 2012 2013 2014 Motor Cars 7.2% 7.8% 8.8% 13.0% 13.8% 16.4% 15.3% Vans 11.8% 11.4% 11.6% 12.8% 12.4% 12.1% 12.2% Buses 64.1% 61.4% 56.9% 49.2% 47.6% 44.5% 45.1% Three Wheelers 5.9% 7.4% 9.3% 11.0% 12.0% 13.2% 12.5% Trucks/Lo rry 1.7% 1.6% 1.7% 3.4% 3.3% 2.6% 2.7% Motor Cycles 4.6% 5.7% 7.1% 6.2% 6.7% 6.0% 5.5% 4 Railways 4.7% 4.5% 4.6% 4.4% 4.2% 5.1% 6.8%

4,500,000 4,000,000 Active Vehicle Fleet Growth from 1983 to end, October 2014 3,500,000 3,000,000 Number of Vehicles 2,500,000 2,000,000 1,500,000 1,000,000 500,000 5 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year

4,500,000 4,000,000 Change of Active Vehicle Fleet by Fuel Type 3,500,000 3,000,000 Number of Vehicles 2,500,000 2,000,000 1,500,000 Active Hybrid Vehicles Active Diesel Vehicles Active Petrol Vehicles 1,000,000 500,000 6 0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Year

Growth of Private Passenger Vehicle Fleet 1983 to 2014 2,500,000 2,000,000 Number of Vehicles 1,500,000 1,000,000 500,000 7 0 1983 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Car(petrol) 64,947 72,000 79,760 92,802 142,66 194,42 217,47 234,36 247,44 246,43 265,97 313,69 333,24 356,01 391,05 Cars(Diesel) 6,546 8,037 9,608 15,715 18,267 22,089 21,695 21,097 22,563 22,539 22,580 24,608 29,721 34,230 36,801 Three Wheelers (petrol) 3,290 4,071 9,365 24,905 120,08 286,45 331,13 350,68 369,25 371,86 434,98 540,99 609,61 676,47 736,42 Three Wheelers (Diesel) 0 0 0 0 0 0 0 0 0 0 7,361 22,134 29,098 33,686 39,330 Motorcycles (petrol) 74,769 108,50 320,45 480,39 576,42 784,12 907,64 1,051, 1,163, 1,224, 1,398, 1,617, 1,770, 1,913, 2,158,

Growth of Public Passenger Vehicle Fleet from 1983 to 2014 200,000 180,000 160,000 140,000 Number of Vehicles 120,000 100,000 80,000 60,000 40,000 20,000 0 1983 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Dual 8 Purpose/4WD/Van (petrol) 0 0 0 0 0 0 0 0 0 0 604 1,339 1,880 2,295 2,703 Buses (petrol) 0 0 0 0 0 0 0 0 0 0 19 30 33 35 36 Dual Purpose/4WD/Van (Diesel) 11,036 20,000 33,295 78,155 122,61 159,43 159,87 161,04 162,29 162,68 164,55 173,57 181,15 184,43 186,22 Buses Diesel 10,893 13,304 20,571 27,290 28,501 31,803 32,554 33,018 33,638 34,033 35,043 38,827 40,966 42,238 44,310

Number of Vehicles added to the fleet Actual response from the customers for Hybrid Cars 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1993 2000 2005 2011 2012 2013 2014 2015 Car (Petrol) 13,746 13,054 12,541 41,806 23,184 8,683 12,226 2,099 9 Cars (Diesel) Source: Department 7,406 of Customs 234 393 2,028 5,787 2,730 2,846 178 Car (Hybrid) 10,164 7,514 6,451 23,287 4,371

Fleet Characteristics for less than 5 Years old Motor Cars by Fuel Type as at 2014 Car (Hybrid) Car (Petrol) Cars (Diesel) 10

Fuel Consumption and Operated Vehicle Km's by Transport Sector (in millions) 2007 2008 2009 2010 2011 2012 2013 2014 Petrol 667 668 695 776 708 999 829 885 Vehicle Km 7,679 7,737 10,074 11,473 11,116 15,939 15,243 17,044 Diesel 2,087 1,801 1,885 1,782 1,721 2,142 1,553 1,996 Vehicle Km 9,001 6,696 8,139 7,685 9,286 11,535 10,378 13,335 Fuel Efficiency - Km's per liter 2007 2008 2009 2010 2011 2012 2013 2014 11 Petrol Don 11.5 S. Jayaweera 11.6 14.5 14.8 15.7 16.0 18.4 19.3

Average Vehicle Occupancy by Vehicle Type Mode/Vehicle Category 2008 2009 2010 2011 2012 Motor Cars 2.0 2.0 2.0 2.8 2.8 Vans 3.0 3.1 3.1 3.0 3.0 Buses 52.0 52.0 47.1 46.1 46.1 Three Wheelers 2.2 2.2 2.2 3.1 3.1 Trucks/Lorry 1.3 1.3 1.3 2.9 2.9 Motor 12 Cycles 1.3 1.3 1.3 1.3 1.3

Emission Emitted by Vehicles (Estimates) Time Series Data 13 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Summery of Emission Transport Sector in'000 MT CO HC Nox PPM 2008 1,948 3,872,240 6,230,936 1,077 2009 2,397 4,853,498 6,649,152 1,401 2010 2,631 5,408,608 5,929,915 1,372 2011 2,684 5,362,001 6,427,923 1,590 2012 2,902 5,842,370 6,458,606 1,550 2008 2009 2010 2011 2012 CO HC Nox PPM

Economic Policy Intervention for Demand Management on Vehicles to shift from dieselization Fleet 1. Introduction of Economic Instruments on Vehicle Technology for emission reduction in 2011; 2. High Taxes (import duty, Exercise Duty based on fuel efficiency) revised in 2013 January; 3. High Taxes on importation of used cars less than 1 year taking price of brand new for tax purposes; 4. High Tax threshold introduced for less fuel consumption motor cars and jeeps on special permits given by the government 14

Demand Elasticity on Motor Car Prices Type of fuel k Income elasticity Own-price elasticity Cross-price elasticity R 2 Gasoline +1.76 α p =.296 β p = -.078 ϕ = +.250 0.67 (9.71) a (6.78) (1.49) (5.23) Diesel +1.83 α d =.129 β d = -0.136 γ = +.105 0.88 15 (8.80) (2.58) () (1.75)

Elasticity on Operated Vehicle-km s (based on private cost of vehicle owner) 16 Vehicle category Elasticity of the average private cost Cars (Diesel/Petrol) -0.349 Light Truck (Diesel) -0.230 Medium Truck (Diesel) -0.443 Heavy Truck (Diesel) -0.260 Medium Buses (Diesel) -0.150 Large Buses (Diesel) -0.130 Motor Cycles (Petrol) -0.462

Taxes Applied from 2007 up to 2015 17 I. Customs Duty; II. Value Added Tax; III. Social Responsibility Levies; IV. Ports and Airport Development Levies; V. Value Added Tax; VI. Cess; VII.Excise Duties; VIII.Nation Building Tax and IX. Road Infrastructure Development Levies

Fiscal Levies on Motor Vehicles - 2015 Present Scenario 11 Cumulative Change CD PAL Excise VAT NBT Cess Total Excise Total Petrol Car Golf Cars 25% 5% 45% 12% 2% 0% 124% 100% 115% -9% Less than 1,000 CC 25% 5% 92% 12% 2% 0% 202% 150% 173% -29% 1,000-1,599 cc 25% 5% 92% 12% 2% 0% 202% 150% 173% -29% 1,600 cc - 1,999 cc 25% 5% 92% 12% 2% 0% 202% 150% 173% -29% 2,000 cc - 2,999cc 25% 5% 122% 12% 2% 0% 251% 200% 230% -21% Exceeding 3,000 cc 25% 5% 137% 12% 2% 0% 276% 220% 253% -23% Diesel - Car Less than 1,600 CC 25% 5% 122% 12% 2% 0% 251% 200% 230% -21% 1,600 CC - 2,000 CC 25% 5% 137% 12% 2% 0% 276% 220% 253% -23% 2,000 CC - 2,500 CC 25% 5% 152% 12% 2% 0% 301% 240% 276% -25% Exceeding 2,500 CC 25% 5% 183% 12% 2% 0% 352% 300% 345% -7% Hybrid Petrol Car Less than 1,000 CC 15% 5% 14% 12% 2% 0% 60% 50% 58% -2% 1,000-1,599 CC 15% 5% 14% 12% 2% 0% 59.75% 50% 57.50% -2% 1,600 cc - 1,999 cc 15% 5% 14% 12% 2% 0% 60% 50% 58% -2% 2,000 cc - 2,999cc 15% 5% 40% 12% 2% 0% 100% 85% 98% -2% Exceeding 3,000 cc 15% 5% 57% 12% 2% 0% 126% 100% 115% -11% Hybrid Diesel Car Less than 1,600 CC 15% 5% 21% 12% 2% 0% 71% 60% 69% -2% 1,600 CC - 2,000 CC 15% 5% 21% 12% 2% 0% 71% 60% 69% -2% 2,000 CC - 2,500 CC 15% 5% 40% 12% 2% 0% 100% 85% 98% -2% 18 Exceeding 2,500 CC 15% 5% 57% 12% 2% 0% 126% 100% 115% -11% Electric Car Car - Electric 15% 5% 0% 12% 2% 0% 38% 22% 25% -13%

Diesel Van Present Scenario 11 Cumulative CD PAL Excise VAT NBT Cess Total Excise Total Change Less than 13 person 25% 5% 122% 12% 2% 0% 251% 200% 230% -21% 13-25 Person 25% 5% 46% 12% 2% 0% 126% 85% 98% -28% Petrol Van Less than 13 person 25% 5% 92% 12% 2% 0% 202% 150% 173% -29% 13-25 person 25% 5% 46% 12% 2% 0% 126% 85% 98% -28% Limousines Diesel 25% 5% 183% 12% 2% 0% 352% 300% 345% -7% Petrol 25% 5% 152% 12% 2% 0% 301% 240% 276% -25% Three Wheelers Petrol 15% 5% 53% 12% 2% 0% 120% 105% 121% 1% LP Gas 15% 5% 45% 12% 2% 0% 107% 95% 109% 2% Diesel 15% 5% 53% 12% 2% 0% 120% 105% 121% 1% Electric 7.5% 5% 29% 12% 2% 0% 72% 65% 75% 3% Electric Cargo 25% 5% 16% 12% 2% 0% 76% 20% 23% -53% Auto - Trishaws - Electric 15% 5% _ 12% 2% 0% 38% 26% 30% -8% Lorries - Trucks Less than 800Kg P/D 15% 5% _ 12% 2% 0% 38% 26% 30% -8% 800 Kg - 2,00 Kg P/D 25% 5% 3% 12% 2% 0% 55% 45% 52% -3% 2,000 Kg - 5,000 Kg 15% 5% 14% 12% 2% 0% 60% 50% 58% -2% 05-20 MT 0% 5% 29% 12% 2% 0% 61% 50% 58% -3% 19 More than 20 MT 0% 5% 35% 0% 2% 0% 50% 40% 46% -4% Petrol More than 08 MT 8% 5% 29% 12% 2% 0% 72% 60% 69% -3%

Road Map for Cleaner Fuel Led Fee Petrol introduced in 2002; Market fully given low sulphur diesel since 2003 Introduction of low sulphur Diesel (10 ppm)from June 1 st, 2014; Reduction of regular diesel sulphur level to 1,000 ppm from December 31 st, 2015; Low sulphur diesel (10 ppm) will be fully dominated the market in 2020 20

Regulatory Regime for Cleaner Fuel Stringent Fuel Quality Standards to be introduced from 2015; Fuel Quality parameters to be tested by independent audit; Petroleum Refinery to be rehabilitated or new construction to produce Euro-IV diesel fuel; Pricing of fuel to be use as tool to get cleaner 21 fuel demand increased through taxes

Thank You!! 22