Hike in excise duty on diesel cars on the cards

Wednesday 30 May 2012, 11:29 AM by

Though the government has said that it will not hike the prices of fuels like diesel, LPG and kerosene, the Finance Ministry of India has proposed a hike in the excise duty levied on diesel-run cars. The recent development came after an inter-ministerial meeting was held to discuss inflation and the cost of diesel. According to sources, the Empowered Group of Ministers (EGoM) will meet on June 1, 2012 to discuss the increase in LPG and fuel prices.

This increase in taxes on diesel cars was suggested by the Oil Ministry before the 2012 Union Budget was announced. Back then, it demanded a hike of Rs. 80,000 on the passenger vehicles that run on the subsidised fuel. However, this met with strong protests from the automotive industry as well as Department of Heavy Industries of India.

Reportedly, the Finance Ministry has proposed to raise the excise duty on diesel cars in a bid to discourage buyers from purchasing such passenger vehicles. However, the authorities are yet to take a final call on this said a senior personnel working at Central Board of Excise and Customs. Nevertheless, he said that the national government is likely to pass this proposal in light of the fact that the difference between petrol and diesel prices is around Rs. 25 per litre. Due to this disparity in the prices of the two fuels, buyers are steadily migrating towards diesel cars while the sales of petrol vehicles are lagging.

UPA, the ruling alliance, has faced criticism from all quarters ever since it raised petrol prices by Rs. 6.28 (excluding VAT). After increasing the petrol prices, the government refrained from hiking diesel prices as the Congress suggested it would be a wrong move. According to Congress, the timing of this petrol price hike was not right as well, although it conceded that there was an urgent need to raise the price of the fuel.

As per sources in the Congress, "Petrol price hike should not have taken place a day after the UPA-II report card was presented and Parliament session ended." The opposition as well as the political allies of the Congress have demanded a roll back on prices and are holding strikes and protest marches across the nation.