shares of automobile companies, including tyres and auto ancillaries companies declined  in today’s trading session  as investors booked profit after the government proposed the introduction of 'green tax' on old vehicles.

Shares of Ashok Leyland, Bharat Forge and Tata Motors slipped in the range of 3 to 4pc, while Eicher Motors, Motherson Sumi Systems, Balkrishna Industries, MRF, Hero MotoCorp and Amara Raja Batteries slipped 1 to 2pc

Reportedly, Union Minister for Road Transport and Highways Nitin Gadkari said on Monday that his department has approved a proposal to levy 'green tax' on old vehicles polluting the environment. However, before being formally notified, the proposal will have to go to the states for consultation.

The report said that as per the proposal, a green tax will be imposed on transport vehicles older than eight years at the time of renewal of the fitness certificate, at the rate of 10-25pc of road tax, while personal vehicles will also be charged the same levy at the time of renewal of registration certification after 15 years. However, public transport vehicles, such as city buses, will be charged a lower green tax.

As per the statement by  Motilal Oswal Securities, the green tax would raise the cost of doing business for small fleet operators using commercial vehicles older than eight years, however, the cost may not be material enough to buy new vehicles. However, the brokerage added that the expected scrappage policy, along with the green tax, can be effective in spurring demand for new vehicles.

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