The changes to heavy vehicle charging
Both industry and government recognise that the current system of calculating an annual increase to the RUC, corresponding to the cost of building and maintaining the road network, has a limited lifespan.
The diesel fuel excise is fixed at 38.143 cents per litre, and the RUC is set at 26.14 cents per litre for the 2013/14 financial year. This provides businesses operating a truck over 4,500 kg Gross Vehicle Mass with a fuel tax credit of just over 12 cents a litre. Depending on the amount of annual increases, the current scheme probably has a decade at best before the RUC reaches the excise amount, after which the system must be changed.
The substance of the Heavy Vehicle Charging & Investment Reform (HVCIR) was discussed in this column back in the May edition. The recommendations of the HVCIR project are due sometime in 2014, for adoption several years after that, and they are likely to propose industry moving towards telematics technology to accurately charge trucks for their use on a mass-distance-location (MDL) basis. In many eyes, this would be a more effective “user pays” system compared with the combination of high annual registration charges and Road User Charge (RUC) that we currently have. While deliberations continue as to what will eventuate from the HVCIR office, there are more immediate developments.
These developments come from the National Transport Commission, which has devised several options to make a structural adjustment to the balance between fixed annual registration charges and RUC charges that are variable in nature as they change with fuel usage. By the time you read this column, we will be in the midst of the public comment period for a Discussion Paper on this subject, so that industry can provide feedback prior to the final change being approved by transport ministers in May 2014, for a 1 July 2014 change. This project was started in response to operators who consider that heavy vehicle and trailer registration charges are unsustainably high, and create a considerable annual impact on business cash flow.
By contrast, the RUC is paid throughout the year along with fuel use, and the resulting fuel tax credit is claimed every quarter, assisting with business cash flow.
A key change being considered is a considerable reduction to fixed registration charges for all trucks and trailers, and an increase of RUC by an amount which will bring total collections back to that which are required for road maintenance. But, how much is a reasonable adjustment? If the one-off RUC increase on 1 July 2014 is too high, it will not leave any room for future annual adjustments before the NVCI Reform is implemented. If too low, the registration charges will still be considered a prohibitive impost on transport operators. Of course, there will be the inevitable “winners and losers” from any such change. A high RUC increase (and substantial cut to registration charges) will favour operators who do not travel high distances each year. On the other hand, a minor RUC increase and maintenance of high registration charges will be a better option for long-distance high load operators.
Beyond the obvious impact of the NTC’s structural change for next year, I wonder if a substantial change to registration charges may start to change operators’ buying patterns when it comes to new trucks. For example, a significant cut to registration charges for a small prime mover and short semi-trailer (as I have promoted in this column previously) might lead some operators to reconsider their use in lieu of the less manoeuvrable long rigid truck, which may also use more fuel in city operations. Or, if the RUC increases “too much” for some long distance operators to bear, will that result in a shift of some freight across to rail? Or at least a more scientific approach to, and widespread adoption of fuel saving measures on long distance trucks such as aerodynamic devices?
The NTC’s Discussion Paper promises to generate a lot of industry postulation over the December/January holiday period, and I am sure we will see a variety of preferred options from different sectors of the road freight industry.
Individuals and groups are encouraged to provide constructive feedback to the NTC on this heavy vehicle charging discussion paper, and it will be fascinating to see what becomes the final outcome in May 2014. For now, best wishes for health and happiness this festive season and into the New Year.