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      Proposed hike in diesel car taxes to hurt auto industry, say car makers

      CarTrade Editorial Team

      CarTrade Editorial Team

      The leading automobile manufacturers of the country have said that the government's proposal to increase the excise duties levied on diesel-powered cars will weaken the prospects of the industry. Till March 2012, sales of diesel cars have grown twofold over the previous year and were responsible for over 40 per cent of new car sales in the domestic market. Reportedly, most of the Sports Utility Vehicles (SUVs) and jeeps purchased by the newly wealthy buyers ran on the subsidised fuel, along with luxury saloons manufactured by the likes of Audi and BMW.

      On the other hand, the national government is trying to lure more foreign investments in the country, due to which it has to control spending on subsidies provided on fuel and fertiliser. India has to import 80 per cent of the total fuel consumed in the country and is combating spiralling prices in the international market.

      The new proposal is in line with the government's plan to not raise the prices of kerosene and diesel. Rather, it targets passenger vehicles that run on the latter in bid to curb diesel consumption. As of now, the Oil Ministry has not said how much the taxes will increase, but a pre-Budget proposal put the figure at Rs. 80,000. Back in 2010, the auto lobby of India vehemently opposed a proposal that included a Rs. 80,000 charge on the industry.

      Heads of automobile giants like Tata Motors, Maruti Suzuki, Mahindra & Mahindra and Ford have made their sentiments clear to the Finance Ministry on this matter. President and Managing Director, Ford India, Michael Boneham, stated "We as an industry made it very clear to the finance ministry that any proposal to tax diesel vehicles... would have a negative impact on the industry as a whole at an already difficult time."

      According to Society of Indian Automobile Manufacturers (SIAM), diesel cars use up less then 7 per cent of the subsidised fuel in the country, whereas government bodies peg the figure at 15 per cent. The difference between the prices of diesel and petrol currently stands at approximately Rs. 30 per litre, wherein the prices of the latter have not increased since July 2011, whereas the former's were raised by a massive Rs. 6.54 (plus taxes) last week. However, analysts have said that they are unsure how the government will put this diesel tax into effect in India and the how they will affect the economy.

      Tata