Economic Times (19 Feb 2007) reports that the urban development ministry has proposed an urban transport cess on cars (5%) and two-wheelers (2%) to fund bus based public transport
http://economictimes.indiatimes.com/...ow/1635521.cms. While the cess could solve the problem of resource mobilization for public transport, it still does not provide enough disincentive against the cancerous growth of private vehicles that clog the roads.
A biodiesel cess should be levied on petrol and diesel to promote the biodiesel alternatives. The funds from the cess could be used for increasing the price offered for biodiesel from the piddly Rs 25 to Rs 40. Assuming that 20 % of the fuel requirements are met from renewable sources, this means that the cess on a litre of diesel or petrol should be around Rs 3/. Thus from 4 litres of diesel or petrol we get about Rs 12 that can be used to fund one litre of BD.