Leading car manufacturers become critics as the Government becomes clueless

Friday 16 September 2011, 18:19 PM by

The leading car companies of late have been playing the role of critics. The topmost automobile brands like Maruti Suzuki, Hyundai, Toyota and Mercedes-Benz have criticized the government for creating obfuscations regarding their take on the pricing of diesel. They vehemently conveyed that the uncertainty surrounding the issue led to problems in implementing investment and sales plans. Such reactions by the car makers can be attributed to the existence of rift within the government regarding energy subsidies. Some sections within the government are in support of deregulating the price of the fuel to ensure the car buyers do not take direct advantage of government's subsidy on diesel. On the other hand, others have demanded that excise and other taxes on diesel vehicles should be hiked to compensate for the subsidy.

Maruti Suzuki Chairman R C Bhargava said "We do not know what to do. However, since the government's future direction on the matter is not clear, we are not sure how much should we invest in diesel engine technology." He also added that “The wide price differential between petrol and diesel had resulted in a huge spurt in demand for diesel vehicles.”

Leading car manufacturers become critics as the Government becomes clueless   | CarTrade.com
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Sandeep Singh, Deputy MD of Toyota Kirloskar Motors also express his concern. He said "We keep hearing many statements and get confused. They need to be clear on the future direction in terms of policy. It's difficult to work out clear investment and sales plans due to lack of a concrete policy. It is difficult to change our plans suddenly as we also align our needs with vendors, suppliers and our own production team.”

Heavy industries Minister Praful Patel added to the existing confusion regarding the government's stand on the matter when he conveyed last week that there was no move to decontrol the price of diesel. He was quoted as saying, "Diesel and petrol price disparity will stay. It will not go away as we have a social obligation." However, Planning Commission Deputy Chairman Montek Singh Ahluwalia had a complete contrast of views as he felt that the price of diesel should be freed.

“Clarity was required immediately”, said Dabashis Mitra, Director (Sales & Marketing) Mercedes-Benz India. He also added that "You have to give enough timeline to companies to implement any policy you finally decide to opt for. Thus, the policy needs to be made clear now."

Hyundai Motors also presented its point of view. Arvind Saxena, Director, Sales and Marketing said, “Please remember that anything that the government wants on the regulatory side affects our plans." He added that “The government needs to provide a 'clear roadmap' on the way forward. We cannot change our plans suddenly."

Thus, if the government concludes that there will be deregulation of diesel and in future if its price goes up, then the demand for diesel vehicles will gradually come down and companies will keep a check on its investments on the fuel. But if the government continues with its current stand that encourages a huge price difference between petrol and diesel.

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