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SUVs may become dearer as govt mulls hiking excise duty in Budget

India's new-found love for SUVs, which mostly run on diesel, has caused a bit of stir in the finance ministry just ahead of the Budget. The government is contemplating an increase in the excise levy on diesel SUVs.

twitter-logo Sunny Sen        Last Updated: January 24, 2013  | 11:10 IST

Sunny Sen
French carmaker Renault's Duster has taken the Indian Sports Utility Vehicle (SUV) market by storm. In less than a year, the car is selling more than 4,500 units a month. But will it last?

India's new-found love for SUVs, which mostly run on diesel, a cheaper fuel, has caused a bit of stir in the finance ministry just ahead of the Budget. The government is contemplating an increase in the excise levy on diesel SUVs.

The prices of these large vehicles, estimated to account for 20 per cent of India's car sales, are expected to go up if such a thing happens. SUV maker Mahindra and Mahindra's Scorpio and XUV 500 would get dearer and so will models made by Toyota, Maruti Suzuki and Tata Motors.

Understandably, Anand Mahindra, Chairman of Mahindra & Mahindra, is not pleased. He has said that the government should not treat the auto industry as a golden goose that can be taxed. At a time when car sales are at an all-time low, the increase in excise may be a deterrent for SUV makers.

Currently, both petrol and diesel cars exceeding four metres in length, with an engine capacity of less than 1,200 cc in petrol versions and 1,500 cc in diesel versions, pay 24 per cent duty. And 27 per cent for additional engine capacity.

The Kirit Parikh committee, which was set up to figure ways to curtail India's oil subsidy, and which submitted its report in 2010, had proposed an additional duty of Rs 80,000 on diesel SUVs.

In 2010, Union Rural Development Minister Jairam Ramesh had gone so far as to term the use of SUVs "criminal", and called for heavier levies on diesel sold to SUV users. Subsidised diesel, he pointed out, was meant for use by farmers, whereas SUVs are owned by affluent people.

Ramesh has a point. SUV prices start at around Rs 8 lakh and can go well in excess of Rs 60 lakh. Anyone willing to spend that kind of money would not find it hard to cough up a little more on diesel.

A few lakh rupees will be nothing for those who want that testosterone high.


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