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10 per cent extra duty to be imposed on diesel cars in new Budget

Taking a cue from the Parliamentary Standing Committee on Petroleum and Natural Gas, the Centre has proposed to levy 10 per cent additional duty on passenger diesel cars in the Budget.

Anuradha Shukla   New Delhi     Last Updated: February 13, 2012  | 16:58 IST

If you are planning to buy a diesel car any time after March, chances are that you will have to shell out more money for your purchase.

Taking a cue from the Parliamentary Standing Committee on Petroleum and Natural Gas, the Centre has proposed to levy 10 per cent additional duty on passenger diesel cars in the Budget. "As per the recommendation of the Parliamentary Standing Committee the finance ministry has proposed to levy up to 10 per cent duty on diesel passenger cars. This was under consideration for a long time," a senior finance ministry official told Mail Today.

"The levy will be higher on diesel SUVs (sports utility vehicles), which consume more subsidised fuel. The idea is to keep a check on the growth of passenger diesel vehicles and also to help the oil companies recover their losses on account of the diesel subsidy," the official added. At present, some state governments, including Delhi, already impose an additional tax on diesel vehicles.

A Parliamentary Standing Committee has told the government to deny subsidised diesel to private car owners as their numbers have increased substantially over the last eight months. The committee chaired by Aruna Kumar Vundavalli urged the Centre to levy a cess on diesel cars to be paid at the time of purchase.

This amount could be used to compensate oil marketing companies - Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) - for the losses they incur on selling subsidised fuel.

The committee's report said, passenger vehicles, industries and power generation units account for about 33 per cent of the total diesel consumption in India.

However, the move is being opposed by the ministry of heavy industries, which claims this fresh levy will hamper the growth of the auto sector. The ministry also said that the Kirit Parikh Committee report, which says passenger vehicles consume 15 per cent of diesel, is incorrect. Heavy industries minister Praful Patel wrote to finance minister Pranab Mukherjee two weeks ago saying the diesel consumption by cars was significantly lower than the figure stated by the report.

According to Society of Indian Automobile Manufacturers (SIAM), "From April last year onwards, the demand for diesel cars has gone up by more than 24 per cent, while the sales of petrol car has declined by 16 per cent." Earlier, the share of diesel cars was restricted to 25 per cent of total sales but from April, 2011 onwards it has gone up to 70-80 per cent for the models offering diesel variants. At present, diesel cars account for 40 per cent of total auto sales.

With the sudden surge in demand, many auto firms are even considering expanding their diesel vehicle manufacturing facilities. "We cannot make any announcement for facility expansion till the government comes up with clear diesel pricing. I hope it will be clear in the upcoming Budget session and till that time we are just keeping it on hold," R.C. Bhargava, chairman and managing director, Maruti Suzuki India Ltd (MSIL) told Mail Today last week.

Hyundai, Toyota, General Motors and Ford are also mulling increasing their investments in diesel auto manufacturing units.

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