SIAM meets finance ministry to discuss tax on diesel cars

June 7, 2012: The government, which seems to be going ahead with plans to levy an additional tax on diesel-engined vehicles to neutralise the massive Rs 30 price differential per litre between diesel and petrol, is facing stiff opposition from automakers.

Speaking at a media meet today in Mumbai, Pawan Goenka, past president, SIAM and president, automotive and farm equipment sectors, Mahindra & Mahindra (pictured), said: "Passenger vehicles consume 6.8 percent of diesel in the country. 1.6 percent of that is consumed by vehicles for personal use, and 0.5 percent of that is consumed by 'affluent people' owning vehicles of Rs 10 lakh or above."

His comment echoes the industry's stand on opposing additional tax on diesel vehicles. A SIAM delegation comprising chiefs of the country’s top six manufacturers including Maruti Suzuki, Tata Motors, Hyundai Motor India and M&M met with finance ministry officials on June 6 to educate them about the adverse impact on the automobile industry if an additional tax is levied on diesel vehicles. In 2011-12, 45 percent of the passenger vehicles sold were diesel-run. "25-30 percent of the existing population of cars run on diesel," said Vishnu Mathur, director-general, SIAM.

The SIAM delegation put across two proposals to the government to tackle the fiscal deficit -- raise diesel prices gradually or have dual pricing of the fuel. "The government can increase diesel price by Re 1, cut petrol price by Rs 6 and still generate additional revenue," pointed out Goenka. "A five percent increase in excise duty will earn the government Rs 2,500 crore extra. A hike of Re 1 per litre of diesel will fetch Rs 6,000 crore,"added Goenka.

SIAM feels that any further widening of diesel and petrol prices will make it difficult for the government to reduce the gap later. The difference between prices of these two fuels stood at 30 percent in January 2010. Currently, it is 75 percent.

The finance ministry has not taken a call yet on levying any new tax on diesel cars. It has sought more information from SIAM before it takes a final call. Till then, SIAM, as well as diesel vehicle buyers, will keep their fingers crossed. Stay tuned.

SUMANTRA BAROOAH