Diesel Cars May Attract Higher Excise Duty (27-Jan-2012)
The auto industry, since mid 2011, is witnessing a surge in the demand for diesel cars mainly due to the widening gap between petrol and diesel prices. Buyers are increasingly willing to wait for months to buy a diesel car which now constitute nearly 40% of total car sales in the country, compared with less than 20% a few years ago.
Diesel is the most consumed fuel in the country and is subsidized as it is the preferred fuel for the transport sector (both trucks and passenger buses) and is also used in irrigation pumps and other agriculture equipment. It has long been argued that the rich should not get the benefit of this subsidy. 15% of diesel consumption is accounted for by personal cars and SUVs, according to oil ministry estimates.
These facts have not gone unnoticed by the finance ministry which is now considering raising the excise duty on diesel cars in Budget 2012-13. The oil ministry on its part is supporting the increase and is of the view that the additional amount garnered can be used to offset the loss that fuel retailers incur on the sale of diesel at government-controlled rates. The retailers are expected to incur a loss of about Rs 82,000 crore in 2011-12. The diesel price of Rs 40 a litre in Delhi is Rs 14.57 lower than its imported cost.
The Centre for Science and Environment (CSE) has further supported the increase in excise duty of diesel cars. It has reasoned that the higher duty will prevent 'dieselisation' of the economy and also reduce the pollution associated with the fuel. It has charged the automobile industry of fudging data to divert public attention from the environmental and public health impact of excessive use of diesel in passenger cars.'The car industry is getting desperate to prove that cars use negligible amount of diesel.
However, the auto industry body, Society of Indian Automobile Manufacturers (SIAM), has been quick to dismiss CSE's demands, and also played down concerns on emissions. 'Their (CSE) arguments do not make sense at all. Every fuel has its own emission pattern and diesel is not only more fuel efficient than petrol , even its CO2 emissions are less.
If the finance ministry agrees to hike the excise duty on diesel cars, consumers can expect to pay more for them. At the moment excise duty on small cars (under 4 meters, petrol engine below 1200cc and diesel under 1500cc) is 10%, while on bigger cars it is 22%. This is the same for petrol and diesel engine cars. In addition, petrol cars longer than 4 metres and with an engine capacity above 1,200-cc and diesel cars more than 4 metres in length and with an engine capacity above 1,500-cc attract excise duty at the rate of 22 %, plus Rs 15,000. Several companies are awaiting a clear picture on the excise duty before finalising plans to invest more in diesel capacity.
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