Auto cos vexed by Govt.’s hazy diesel policy

Car makers are criticizing government for not having a clear strategy about diesel prices. There is a lot of fuss about deregulation of diesel prices in India like petrol. As of now diesel enjoys subsidy by government and is thus, 40% cheaper than petrol. However it is in the air that government is thinking of removal of subsidy so that diesel joins petrol bandwagon in terms of pricing.

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Car tycoons in India are unhappy with such confusion. According to them this uncertainty was hurting their investment and sales plans. R C Bhargava Chairman of Maruti Suzuki argued that the wide price differential between petrol and diesel had resulted in a huge spurt in demand for diesel vehicles. However, since the government's future direction on the matter is not clear, they are not sure how much investment should they make in diesel engine technology.Echoing the same sentiments, Sandeep Singh, Deputy MD of Toyota Kirloskar Motors said that it's difficult to work out clear investment and sales plans due to lack of a concrete policy.

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It is not possible to change the company's plans suddenly as it aligns its needs with vendors, suppliers and their production team itself. Sandeep said this as the company has recently launched diesel variants of Etios sedan and Etios Liva hatchback. Arvind Saxena, Sales and Marketing Director of Mercedes Benz India condemned government and said that the uncertainty and the confusion led to a delay in their plans to have a diesel engine plant in India. He almost warned the government to provide a "clear roadmap" on the way forward.

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All the perplexity began last week when Planning Commission deputy chairman Montek Singh Ahluwalia advocated that diesel price should be freed from subsidy. On the other hand, Heavy industries minister Praful Patel informed the parliament in a written statement that there was no move to decontrol the price of diesel and that diesel and petrol price disparity will stay as government has a social obligation towards its citizen. If diesel prices experience as surge, demand for diesel vehicles will come down and companies will scale back investments on fuel. However if government continues its existing policy of subsidized diesel it, demand for diesel vehicles will remain high and companies will get encouraged to invest in it.