Government to Impose Special Tax on Diesel Cars

The cost of diesel cars may go up by as much as Rs. 2.55 lakhs as the oil ministry plans to impose a special tax on diesel based cars. This may be done with a view to halt the rapidly increasing dieselization of the economy which has been triggered by the widening gulf between diesel and petrol prices. Diesel cars offer up to 30 per cent more fuel efficiency than petrol cars which has triggered the recent market frenzy for purchase of diesel cars. Added to this is the fact that diesel prices in the country have been stagnant for almost a year. This has increased the gap in differences between petrol and diesel prices by about 74 per cent.

Thanks to this difference diesel car sales have soared through the roof to more than 55 per cent of the total 1.63 units sold in the month of May this year, going up from just 38 per cent last year. "The oil ministry has asked the finance ministry to impose additional excise duty on diesel cars and the matter is under consideration," a government official said. An oil ministry official also added "The money thus raised could be used to meet part of the under-recoveries.”

Car manufacturers however are dissatisfied with this decision and reason that any such decision will slow down the demand for cars even further.“Sale of new cars is already slowing. We have cut production of our petrol models in tandem with the changing market dynamics, and any tax on diesel cars would further taper off demand," said Maruti Suzuki MD S Nakanishi. Diesel car sales so far have still remained optimum despite the government imposing a 5 per cent excise duty on all bigger vehicles with an engine capacity of more then 1,500cc while a general excise duty of only 2 per cent was levied on all other vehicles.

Courtesy: Economic Times

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