Budget 2012: Is Tax on Diesel Vehicles a Valid Move?

Bangalore: Indian Automobile Companies as well as users are waiting eagerly for the government’s stand on diesel vehicles as these utility cars are to see an additional tax in the forthcoming budget. But the question is whether government should imply the additional tax?

Last year this diesel factor stimulated the competitive automobile industry. This year also this scene may remain the same. As Pawan Goenka, President of Auto and Farm Equipment Sector, Mahindra & Mahindra said, “Don't expect major announcements (in the budget) that will be a stimuli for the industry, the biggest fear is diesel vehicle tax”.

Ever since the petrol deregulation, the petrol cars sales came down by -16.5 percent. Shashank Srivastava, Chief General Manager, Maruti Suzuki said, “Ever since the petrol de-regulation, the difference between petrol and diesel grew from 10 to 24.73, In the small-car segment where only petrol version is available, sales have been impacted. The petrol car sales segment declined by 16.5 percent while diesel segment grew by 25 percent."

Industry experts say that implying an additional tax on diesel cars will only impact the industry growth which is already been affected in 2011. Pawan Goenka says, “In my opinion to consider an additional tax on diesel vehicles is a retrograde step. In the upcoming union budget this is perhaps the most critical item for the automotive industry which will have a significant impact on the growth of the industry in the upcoming fiscal year”, as quoted by PTI.