Diesel dual pricing leave carmakers in despair

The Government's decision to free the LPG and diesel prices from subsidies, has caused a major concern among the carmakers. They opine that any change in the Government's policy concerning the subsidised diesel prices or levying additional tax on the diesel, will impact the already slow car market. Apparently, the domestic car sales have declined by 10 % in July, which is the worst ever since January, 2009.

The Government has expressed a possibility that, they might be coming up with dual pricing of the diesel to remove the subsidies offered on the diesel prices, fetching a strong reaction from the carmakers. Mr Pranab Mukherji, Indian Finance Minister has expressed that the passenger cars consume about 15% of the diesel supplied in the country and they are trying their best to come up with a strategy to avoid subsidising the diesel price.

Indian minister for oil, Mr Jaipal Reddy has backed the Finance Minister, Mr Pranab Mukherjee's comments, when the latter had expressed his concern over mis-utilization of subsidized diesel prices, including the power generators, are rightly placed, when most of the car makers are struggling to make a shift towards increasing their share in the domestic diesel car market. Apparently, the diesel cars account for 35 % of all the passenger car sales in India, which is a steep growth from before, as the diesel is about 40% cheaper than the petrol and provides about 30% more fuel economy.

Mr Karl Slym of General Motors India has commented that they would favour the market driven diesel prices as any change in the Government's policy regarding the diesel prices, will further impact the already slumped car market. India's largest carmaker Maruti India also reported to have told that they are using the diesel engines in India, instead of exporting them to Hungary. Maruti India, which is an ace player in the hatchback segment, is facing the completion from Ford Figo, Toyota Etios Liva, Volkswagen Polo, and Chevrolet Beat. They are supposed to have told that they are reducing the export of their diesel engines from around 40,000 to almost insignificant numbers in the next six months.

However, SIAM (Society for Indian Automobile Manufacturers) believes that, this is a step taken by the government in the right direction as the petrol price which is already a full-fledged market price; it is good to have the full market pricing of the diesel as well. Mr. Goenka, the president of SIAM is reported to have said that the commercial diesel vehicles should be however exempted from the dual pricing of the diesel, as the crowd from the rural areas might suffer from the blow. Reportedly, over 50 % of the cars sold in Europe are diesel cars.