Before the presentation of budget for the fiscal 2012-2013, auto makers like Renault and Ford have raised objection against the hike of duty over diesel vehicles. The government authorities were demanding this raise in taxes from quite some time. Since the government is all set to showcase the budget, rumour is spread that higher duties could be levied over diesel engine passenger cars. This is because the subsidiary provided on fuel is diverted towards the private use by opulent.
Michael Boneham, President and MD, Ford India, told reporters, "How can you justify taxing only one industry? It is not justified. The automobile industry is the one, which is investing heavily in the country. It is going to affect the industry negatively. Only about 1 per cent of the total diesel consumptions are by personal cars. So I think, it is not a revenue generating step."
The Indian subsidiary of Ford India is investing around Rs. 4,000 crores in its new plant in Gujarat and also supports the cause of tax hike levied over diesel cars, which is initiated by Society of Indian Automobile Manufacturers (SIAM). Following the league, Renault India also invested Rs. 4,500 crores with Nissan, its business alliance, at their Chennai unit and this investments is likely to bear risk if tax polices are modified by the government.
Marc Nassif, Managing Director, Renault India, said, "A significant part of the product portfolio consists of diesel cars and if the government is to change their policy and increase the excise or levy any other tax, then the subsequent demand may be less than what has been projected. This will lead to a major increase in break even period or even a loss for Renault."
Expressing similar sentiments, Mahindra & Mahindra addressed the initiative of tax hike over diesel vehicles as "retrograde", as these practices will not help the industry record growth, which had already faced a tough time last year.
Senior officials of SIAM said that in 2010-2011, the vehicles in India consumed 61.68 million tonnes diesel in all the sectors, wherein taxi cars accounted for 1.82 per cent of diesel consumption. However, private cars accounted for only 1.03 per cent consumption of diesel and Jeeps, which are used for private purposes consumed 0.53 per cent diesel. Moreover, other vehicles that lie in the category of Jeep accounted for 3.44 per cent consumption. As per the reports generated by the government's Petroleum Planning and Analysis Cell (PPAC), the total diesel consumed by MUVs, Jeeps, taxis, three wheelers and cars accounted for 15 per cent.
In order to prevent the exploitation of subsidised diesel, Centre for Science and Environment (CSE) proposed for a hike of duty up to Rs. 1.62 lacs over big sized diesel cars. Agreeing upon the statement, Rajkumar Dhoot, newly appointed President of Assocham also said that the subsidised diesel should not be provided to telecom towers, luxury cars and other commercials. Subsidised diesel should be only restricted to transport and agriculture sectors, he further added.
