Diesel duty gives jitters to car makers

Jun 07, 2012 |

New Delhi

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Representatives of top auto manufacturers on Wednesday asked the finance ministry to hike diesel prices rather than hiking taxes on diesel cars to curb the use of diesel as against petrol vehicles.

Due to an almost 43 per cent difference in prices of diesel and petrol, there has been an increase in the sale of diesel vehicles last year. In March 2012, 40 per cent of all new cars sold were diesel cars.

To prevent this, the finance ministry is looking to hike duties on the diesel cars which has been recommended by various committees. A tax of `80,000 has been recommended on diesel cars.

“One of the proposal we gave to the finance ministry is that they hike diesel prices by Rs 2 to Rs 4 per litre and cut petrol prices by Rs 8 to Rs 10 per litre. This will be more practical than hiking taxes on diesel cars,” said a one official from the auto industry who was present in the meeting.

He said that a Rs 1 per litre increase in diesel prices gives government scope to cut petrol prices by Rs 4.

“The five per cent increase in duty on diesel cars will give government a revenue of Rs 2,500 crore, which will not solve the problem of subsidies.

The duty increase will only create distortion,” said the official. The auto industry said that they will be agreeable if the government goes for dual pricing of diesel, whereby car owners pay higher prices for the diesel as compared to truckers or other users.

“The finance ministry wanted to know whether increase in duties in diesel cars, will increase the sale of petrol cars. We told them that it is not going to happen,” he added.

“The finance department called the industry leaders to discuss certain issues. The diesel taxation issue was one of them. Higher taxes on diesel vehicles is a clear ‘no’ from us,” Mr Goenka, Mahindra & Mahindra president said.

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