Hike in excise duty on diesel cars by Petroleum Ministry at the 2012 budget session

Over the auto industry the government is literally hooked up. Big time battles are going on in the parliament sessions regarding the diesel subsidies and the government’s move to handle the issues. Indian government has commissioned Dr Kirit Parikh and his team to offer a better solution to the ongoing battle between the petrol Vs diesel cars to strike a balance at some point. Looking at the seriousness of the matter DR. Parikh suggested a raise in the excise duties on the diesel cars straight to Rs 80,000 in one go. Whether it is feasible or not is a matter which requires an in depth study, but Government has to do something very quick to knock down the raising voices from the opposition.

All the same time, Government has to agree to some valid points raised by a couple of eminent personalities among which Jairam Ramesh who is a not only a renowned economist but also a present union minister voiced a very valid point saying that the luxury car manufacturers are seeking out the ungainly needs from the present diesel subsidy policy. However, it is true all the same as the top manufacturers like BMW India, Volkswagen India and now Renault are bound to gain traction in the country with their expertise in diesel engine technology just to match the diesel car demands in the country despite the luxury segment being the most ineffectual lot. Almost all the cars right from the cheapest in the stable BMW X1 to the maximum priced BMW 7 series are all offered with the diesel engines powering the cars and the same we can say about the Renault cars in India.

For many the next budget session would be a turning point. Numbers of carmakers are keeping their fingers crossed waiting for the next move from the government and among them is our Maruti Suzuki India who is two ways about the expansion plans for ramping up the diesel engine production. Agreed that Maruti Swift diesel among the other Maruti diesel cars, are testing the patience of the consumers with the extended wait periods. But, MSI hands are tied even to look at ramping up the production base in Gujarat for Government could play cruel joke increasing the excise duty on diesel cars. The Indian car market had been unusually slow last year which even the layman would be able to figure out.

The demand of petrol car is anyway down thanks to the multiple revisions of the petrol price in India which has increased the petrol price from Rs 40 to over Rs 70 ever since the petrol was decontrolled in June 2010. This has totally changed the market scenario upside-down to 80:20 ratio of diesel and petrol car sales, while diesel car sales are only keeping the market moving at some pace or the other even lifting up the sales in December to 8.5% over the exceptionally growing car market in 2010. But, all this is going to change with one move from government and bring the car market to standstill if the additional excise duty is slapped on the diesel cars as suggested by the market experts. At this point, one could only say that Government needs to think twice before making any uncalled move causing an adverse effect instead.