Diesel cars to get expensive by up to Rs 2.55 lakh

Last week, we had reported that the Finance Minister, Pranab Mukherjee is reviewing a proposal that could bring about a hike in diesel car prices, so as to control the unhealthy rise in demand for diesel-powered cars in the current era of ridiculous petrol prices. Furthering the development is today's reports, suggesting an imposition of a special tax on diesel vehicles by up to Rs 2.55 lakh.

The government plans to impose additional taxes of Rs 1.70 lakh on small diesel cars and Rs 2.55 lakh on medium and large diesel sedans and SUVs to check dieselisation of the economy, which is being triggers by the widening gap between petrol and diesel prices. 

"The oil ministry has asked the finance ministry to impose additional excise duty on diesel cars and the matter is under consideration," a government official said. Oil Ministers have further confirmed that its proposal to impose tax on diesel car was "favourably" considered. "The money thus raised could be used to meet part of the revenue losses of state oil firms have incurred from selling fuels below the market rate." an oil ministry official said. 

Diesel cars are more fuel efficient than petrol and offer 30 per cent more mileage, which has prompted many to opt for such cars. Besides, diesel price has been frozen in the country for almost a year due to political compulsions that has made it almost 74 per cent cheaper than petrol. Helped by this increasing price differentiation, sales of diesel cars have zoomed to over 55% of the total 1.63 lakh units sold in May this year, up from mere 38 per cent last year.

Obviously, the Indian automaker aren't too pleased with the anticipated additional taxes on vehicles running on heavily subsidized diesel, as they reasonably fear that the move will only dampen the already bleak looking auto industry. A similar proposal was presented to the government, back in 2010, recommending an additional imposition of Rs 80,000 on diesel cars. Back then, all the automakers successfully lobbied against the proposal.