Reddy's diesel tax idea 'highly flawed': Praful Patel | delhi | Hindustan Times
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Reddy's diesel tax idea 'highly flawed': Praful Patel

delhi Updated: Jun 20, 2012 19:05 IST
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Terming oil minister Jaipal Reddy's proposal of levying additional duty of up to Rs 2.55 lakh on diesel cars as "highly flawed", heavy industry minister Praful Patel has written a letter to finance ministry saying such a move was "unjustified".

In a letter to finance minister Pranab Mukherjee, Patel said: "This would amount to an unjustified abnormal hike in excise duty in case of small diesel cars which would definitely be resented by the consumers."

He was referring to Reddy's recommendation to the finance ministry suggesting a hike in excise duty on diesel vehicles ranging between Rs 1.70 lakh and Rs 2.55 lakh to make up for subsidised fuel being used in personal vehicles.

Patel further said: "I personally feel that the whole rationale of imposing a higher duty on a particular segment of the automotive sector, namely diesel cars, is highly flawed.."

He said additional taxes on diesel vehicles was not consistent with the ministry's policy and initiatives for developing the auto sector.

"What such a move is more likely to do, I feel, is to deflate the demand and growth of the diesel car segment also and this would lead to negative sales trajectory for the passenger car market as a whole," Patel said.

The finance ministry has been mulling over imposing more levy on diesel vehicles, a move which may discourage consumption of subsidised fuel by personal vehicle owners.

Asking Mukherjee not to impose any additional duty on diesel cars, he said if such a move was taken up "it would further lead to a slowdown in the growth of the auto sector in specific and the industrial growth rate in general which is a cause of concern for the government."

Earlier, Patel had twice taken up the issue with the finance minister.

The automobile industry is opposed to the idea of diesel vehicles being taxed more, saying such a move will hurt the industry which is already reeling under a slump and future investments could also be hurt.

Last week, the department of heavy industry had submitted its report to the finance ministry opposing the proposal. Besides, the Society of Indian Automobile Manufacturers (SIAM) submitted its report to the ministry stating production data of diesel cars.

Car sales in India grew at the slowest pace in seven months during May at 2.78% and stood at 1,63,229 units as against 1,58,809 units in the same month last year.

At present, excise duties on passenger cars range between 12% and 27% depending on engine size and length of the vehicle.