For the past couple of months the Indian government is keen on increasing the excise duty on diesel cars as with the increasing petrol prices and people switching to diesel cars, the consumption of diesel is getting more and more. The Indian government subsidizes diesel fuel and with the increase in diesel consumption, the same is facing serious revenue losses.
The Government felt necessary consulting top executives from Indian automobile industry and Society of Indian Automobile Manufacturers(SIAM) but no extra excise duty has been implemented as of now. The top officials from the auto industry and SIAM are strongly opposing the hike and therefore nothing has happened till now.
Earlier, Oil Minister Jaipal Reddy proposed a price hike of Rs. 2.55 lakhs on diesel vehicles to the Union Finance Minister Pranab Mukerjee which is being opposed by Department Of Heavy Industries(DHI).
A senior DHI official stated,
“What right does the oil ministry have to recommend an excise duty increase? They should only be bothered with the prices of petrol and diesel. Who will invest in India if such a regressive tax is imposed?”
Senior Director of Society of Indian Automobile Manufacturers (SIAM), Sugato Sen said,
“The consideration of additional taxes on diesel cars are still on but any step to hike the same will be done only after the approval of the nodal ministry, the ministry of Heavy Industries and Public Enterprises.”
Sen added,
“Petrol vehicles are not making much business and demand for diesel vehicles has also shed plus another additional tax will further impact demand.”
So the scenario is pretty clear that the government wants to increase the excise duty but DHI is opposing it and so are the top officials from the auto industry. The situation of the market is already weak as there are not enough sales and if the government implements their not so overwhelming proposal, we believe the condition is only going to worsen. Rather at this point, a better approach for the government will be to narrow down the difference between the petrol and diesel prices to bring down the demand of diesel cars in India. Also most of the diesel consumption of India comes from other than passenger cars which includes industrial use, public transport and other industrial use of diesel. We are keeping an eye on the situation and will keep you posted on the same.
