The Union Budget provided relief to auto makers as no additional taxes were imposed on diesel vehicles. With the positive decision of the Government announced, automobile giants like Hyundai, Mahindra & Mahindra and Maruti Suzuki are expected to move ahead with their earlier plans of increasing their engine capacities.
Society of Indian Automobile Manufacturers (SIAM) on 16th March commented that lack of a clear roadmap on diesel pricing and fear of diesel tax led automobile manufacturers to hold their investment of more than Rs. 3,000 crore in the country.
Currently, Petrol is deregulated but diesel which is used in the transport sector enjoys subsidy. Over the past couple of years, increasing petrol prices have raised the demand for diesel vehicles. Hence, various organizations time and again have been demanding for additional tax on diesel cars. Mahindra & Mahindra President (Automotive and Farm Equipment Sectors) Mr. Pawan Goenka said, “There has been no mention of an additional tax on diesel vehicles or on the existing differential pricing of diesel in the Budget...I would therefore assume that diesel vehicles will not be treated any differently."
According to him, awaiting clarity on the issue, companies will hold their investment on diesel engine capacities. "As far as M&M is concerned, whatever we have held back on increasing production capacity of diesel vehicles, we will be going ahead now," Goenka said. Even though, the exact investment amount was not specified by him, M&M announced that it will invest Rs. 5,000 crore for the development of new products till FY'14.
Hyundai Motor India Ltd (HMIL) said that it is analyzing the situation after the Union Budget. The company has already delayed its Rs. 400-crore investment for a diesel engine facility. A spokesperson for HMIL, said, "We have to weigh the pros and cons as there has been no mention of diesel tax in the Budget. Within two weeks we will be taking a decision on whether we should go ahead with our diesel plant or not."
The proposed plant will produce 1.1 litre, 1.4 litre and 1.6 litre engines for Indian market and will have an annual capacity of 1.5 lacs units. According to Maruti Suzuki India (MSI), companies with diesel manufacturing capacity would be happy on the silence of the Government on petrol-diesel price differential. Being questioned whether, MSI will go ahead with its plan of expanding diesel engine capacity, company Chairman R C Bhargava, said, "We can only say after the project report is completed and considered by the management."
