The finance ministry is examining a proposal to hike excise duty on diesel cars and sports utility vehicles (SUVs) in an attempt to discourage the use of subsidised fuel by the wealthy owners of such costly vehicles.
“The proposal to hike excise duty on diesel cars is being examined by the finance minister and after consultations, an appropriate decision will be taken by the government in due course,” Central Board of Excise and Customs (CBEC) chairman SK Goel said on the sidelines of a conference of chief commissioners and directors general of CBEC here on Monday.
The ministry for petroleum and natural gas had in its budget proposal to the finance ministry proposed an additional excise levy on diesel cars in order to discourage consumption of subsidised diesel by personal vehicle owners.
With the highest-ever single hike in petrol price of Rs 7.5 recently, the debate on raising the price of diesel has heated up, but the decision has been kept in abeyance in view of the cascading effect of such a move on transportation costs and the economy in general, especially at a time when the manufacturing industry is under considerable strain and slowdown shadows are darkening.
“If the proposal is accepted, there can be a check on diesel consumption, because at present, many people use diesel-run cars and SUVs, as diesel is cheaper than petrol,” a CBEC official said.
Excise duty on petrol cars with engine capacity under 1,200 cc and diesel cars with engine capacity under 1,500 cc is 12%. The duty on such cars with length exceeding four metres is 24%.
Petrol and diesel-driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively attract an ad valorem duty of 27% and a fixed duty of Rs 15,000.
Diesel is the most consumed fuel in the country but is sold at a discount to its imported cost. Luxury cars and sports utility vehicles (SUVs) run on diesel, and so do power generators at malls, telecom towers and uber-rich farmhouses.
It has long been argued that the rich should not get access to subsidised fuel. According to Oil Ministry estimates, personal cars and SUVs consume 15% of the diesel subsidised for the farmers in India.