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Will budget tax diesel cars?

autos Updated: Dec 19, 2011 23:02 IST
Manu P Toms

The government's stand on diesel vehicles, expected to be announced in the forthcoming budget, seems to be one of the most eagerly-awaited decisions by Indian automobile companies.

While diesel-focused auto makers such as Mahindra and Mahindra are wary of an additional tax for diesel vehicles, India's largest car maker Maruti Suzuki, whose forte is small petrol cars, is looking forward to the budget to firm up its diesel strategy.

The government's partial de-regulation of fuel prices - freeing up petrol prices while retaining its hold on diesel prices - has skewed sales hugely in favour of diesel cars.


Diesel cars and utility vehicles may see an additional tax in the forthcoming budget since freeing up of diesel prices, which involves burdening public and goods transport segments (bus and truck operators), is a complicated affair.

"Don't expect major announcements that will be a stimuli for the industry," said Pawan Goenka, president, auto and farm equipment sector, Mahindra & Mahindra. "The biggest fear is diesel vehicle tax."

Meanwhile, Maruti Suzuki, battered by an erosion of sales following the freeing up of petrol prices, is looking forward to the budget before finalising future investments in diesel technology and power train facility.

"Ever since the petrol de-regulation, the difference between petrol and diesel grew from Rs 10 to Rs 23," said Shashank Srivastava, chief general manager, Maruti Suzuki. "In the small-car segment where only petrol version is available, sales have been impacted. The petrol segment declined by 16.5% while diesel segment grew by 25%."

"For models which have both fuel options, diesel now accounts for 85% of the sales," he said.

"Among cars that have both fuel variants, share of diesel variants grew from 35% to 80% while petrol variants shrunk to 20%," said P Balendran, vice-president, General Motors India.

Hyundai, another major player in the petrol segment, saw sales drop by 20% in November.