Auto companies lobby against tax on diesel cars

Leaders of the Indian automobile industry today opposed a proposal by the government to levy higher taxes on diesel-fuelled vehicles. The finance ministry has been considering this, to check the rising use of the subsidised fuel by car owners.

"It was a consultation meeting regarding the imposition of additional taxes to address the rapid shift in demand in favour of diesel vehicles. All manufacturers were unanimously of the opinion that such a levy would further affect the industry, which has already been struggling with slow sales", said Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers.

The automobile industry, however, was open to a reduction in cost differential between petrol and diesel to redress the skewed demand pattern in favour of diesel vehicles.

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With petrol prices going up six times over the past year, the price differential between the two fuels has increased to a little over Rs 30 a litre. This has made an increasing number of consumers opt for diesel cars, despite an initial premium of Rs 80,000 these.

Sales of diesel vehicles increased 35 per cent to account for 47 per cent of the overall volume in the passenger vehicle industry in 2011-12. Petrol car sales declined 15 per cent during the period.

"Sales are already under pressure due to high interest rates and fuel prices. Consumer sentiment is low. If additional taxes are levied, whatever numbers are coming in will also be affected," said an industry official.

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The Central Board of Excise and Customs (CBEC) has asked industry executives who attended the meeting today to give data related to the inventory position and sales trend over recent months, to better assess the market. "They will come back within a week and we will decide," said S K Goel, chairman of CBEC.

Goel had earlier this week said the finance ministry was examining a proposal to raise the excise duty on diesel cars.

"The proposal is there and that is being examined by the finance minister. Consultations are being held and an appropriate decision will be taken by the government in due course," Goel had said.

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Top executives of automobile companies, including Mahindra & Mahindra president (automotive and farm equipment sectors) Pawan Goenka, Tata Motors managing director (India operations) P M Telang, and Maruti Suzuki India managing director and CEO Shinzo Nakanishi, today met finance ministry officials to discuss the issue.

Others who attended the meeting included Toyota Kirloskar Motor deputy managing director (commercial) Shekar Vishwanathan, Hyundai Motor India director (sales and marketing) Arvind Saxena, Ford India managing director Michael Boneham, Mercedes Benz India's director (corporate affairs and HR) Suhas Kadlashkar, and SIAM's Vishnu Mathur.