Alarmed by the Centre's toying with the idea of imposing an additional tax on the sales of diesel-run cars and sports utility vehicles, auto makers are teeming with alternate suggestions that include a dual pricing policy for diesel, and a 1% increase in the price of diesel.
Top executives of auto companies including PM Telang of Tata Motors, Pawan Goenka of Mahindra & Mahindra, Shinzo Nankanishi of Maruti Suzuki and Arvind Saxena of Hyundai Motors India met senior finance ministry officials on Wednesday to lobby against the petroleum ministry's suggestion to tax diesel vehicles further.
"If you impose 5% additional tax on diesel cars, the government will garner merely Rs. 2,500 to Rs. 6,000 crore... a 1% increase in diesel price will yield Rs. 6,000 crore," Geonka told reporters.
Diesel utility vehicles account for 99% of M&M's sales.
"Additional duty on diesel cars will kill demand," he said.
Auto companies argue that diesel consumed by private vehicles is just 6.8% of total sales, which only 1.6% is consumed for personal use, the rest being used for commercial purpose (road transport industry).
Auto companies have big plans to capitalise on the demand for diesel vehicles and open new plants, which could well be put on hold if the finance ministry's recommendation is implemented as it will drive down vehicle demand.