SIAM warns government against duty on diesel cars

The possibility of additional taxes on diesel cars to curtain their demand has been discussed since 2010. It came into sharp focus before the 2012-13 Union Budget, since the petrol deregulation had already escalated diesel car demand. Now however the things are a lot worse with petrol touching as high as Rs 80 per litre in some cities in the country. The demand for petrol vehicles is so low that even Maruti had to stop production of its small cars to keep a check on the inventory.

However, this really does not mean that everyone who is not buying a petrol is buying a diesel car – there are many who have deferred their purchase plans and industry as a whole is crawling, supported only by diesel cars with long waiting period.  The government wants to reduce consumption of diesel by private vehicle owners, which is to an extent right; because it is subsidised to support industries and farming. However, it is only after massive taxes on petroleum products that the subsidy kicks in, creating a wide rift in petrol and diesel prices.

The SIAM has once again opposed the proposed hike, citing that buyers will further stay away from purchasing car and will soon push industry into negative growth. SIAM lobby group is trying to persuade govt against hike in taxes, opposing oil ministry. Finance Ministry has confirmed that the hike is considered, but will be only implemented after deliberation.  

Auto-companies on the other hand expect stable policies from the government, as companies have already invested a lot diesel R&D and also facilities in the country. The plans will certainly get delayed as FM might get elected as the new president and will have to resign from the post. The new minister will need time and it will be a while, before any crucial decisions are taken.