Levy on diesel cars worries auto giants

Automobile companies are worried over the Budget 2011, the auto giants are hoping that things will work in their favor. The Kirit Parikh Committee report has suggested the government to introduce differential taxation for diesel vehicles in this Budget.

MNCs who have made heavy investments in developing diesel engine plants in India are concerned about the possibility, if this happens, the demand for diesel engine cars in the Indian auto industry will see a downfall and will also affect the plans of the auto giants to invest in the diesel segment in India.

Ford India MD Michael Boneham expressed his concerns over the issue and said that this decision can impact the company's plans to invest in domestic and export capacity. Ford India is working towards the growth of its Indian capacity for both domestic and export capacity, which will be impacted by the government's decision to levy differential taxes on diesel vehicles.

On the other hand Sandeep Singh, deputy MD, Toyota India said that the company is not keen on making any investment in the diesel segment yet, however they do have plans but are yet to take a final decision. Toyota India recently launched its small car Etios in India.

The Kirit Parikh Committee's recommendations suggested that an additional excise duty of around Rs 80,000 should be levied on the diesel cars. The reason behind this recommendation is to balance the fuel price differential. The proposal was made almost a year ago which was strongly opposed by the automobile industry.

Amongst the best-selling small cars in the Indian auto market, most of them are diesel cars.With this change the demand for diesel cars might decrease.

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