2012-13 Budget – 10% Extra Duty on Diesel Cars Expected

10% extra duty has been proposed by the Centre on the diesel passenger cars in the forthcoming Budget after getting cue from the Parliamentary Standing Committee on Petroleum and Natural Gas.

January 16, 2012: Passenger diesel cars may get 10% additional duty charges in the upcoming 2012-13 Budget as proposed by the centre after taking cue from the Parliamentary Standing Committee on Petroleum and Natural gas. So, all those planning to buy diesel cars after the March, 2012 may have to spend more money for the purchase.

“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,” said a senior finance ministry official. “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,” he added.

Currently, some of the state governments including Delhi already levy extra tax on the diesel vehicles. The Parliamentary Standing Committee chaired by Aruna Kumar Vundavalli has asked the Centre to impose additional tax on diesel cars to be paid while purchasing. The committee has also urged the government to deny subsidised diesel to the private car owners as the last eight months have observed increase in the number of diesel private cars.

The report of the committee states that about 33% of the total consumption of diesel in India is done by passenger vehicles, industries and power generation units. The extra amount that will be generated could be used for compensating state-run oil refineries for their incurred losses on selling subsidised fuel.

On the other hand, this proposition is being opposed by the ministry of heavy industries as the ministry believes that this imposition would hamper the growing auto sector. The ministry also declared the Kirit Parikh Committee report stating that passenger vehicles consume 15% of diesel to be incorrect. Praful Patel, Heavy industries minister, also wrote a letter to Finance Minister Pranab Mukherjee saying the figures stated in the report was incorrect and the consumption of the diesel by cars was significantly low.

As per 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.” As of now, the 40% of total auto sales is accounted by diesel cars. From April 2011, the share of models offering diesel variants has jumped to 70-80%, albeit prior to it the share was restricted to only 25% of the total auto sales.

Moreover, many of the companies including Hyundai, Toyota, General Motors, Maruti Suzuki and Ford are thinking over expanding their diesel vehicle manufacturing facilities due to increasing demand for diesel cars in India. “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,” said the chairman and managing director R.C. Bhargava, Maruti Suzuki India Ltd (MSIL).