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Diesel price hike lesser of two evils
Posted on 14 Sep 201219,025 Views14 Comments
Proposal of tax on diesel cars put down by manufacturers as prices of diesel fuel hiked by Rs 5 per litre in all major cities
The first diesel price hike in more than a year clouds the only bright spot in the country's struggling car market, but carmakers will also be quietly relieved after lobbying hard against the gloomier alternative of a tax on diesel vehicles.
Diesel, a heavily subsidised fuel used mainly by farmers and in trucks and buses, has become increasingly popular as many middle class families look to cut their fuel bills, and diesel-powered vehicles are the industry's sole major growth area.
The hike of Rs 5 or 12 percent, announced by the government late on Thursday, comes after months of fierce lobbying by carmakers which argued a proposed tax on diesel-powered vehicles was unfair as it would leave other diesel consumers unscathed. Related: Now diesel gets dearer by Rs 5 per litre!
Even with the hike, petrol remains around 45 percent more expensive than diesel and shares in automakers rose in relief that the government had chosen not to slap a tax on diesel vehicles.
Maruti Suzuki (BSE 4.28 %) India Ltd, the country's biggest carmaker, climbed 2.4 percent while Tata Motors (BSE 4.32 %) Ltd rose 3.3 percent and Mahindra & Mahindra Ltd was up 1.1 percent.
"The way the price difference between petrol and diesel had grown was not desirable. There was a need for an increase," Sugato Sen, senior director of the Society of Indian Automobile Manufacturers, told Reuters after the announcement.
"It would have been better to have a smaller increase, but it is still definitely much better than a tax on diesel cars."
Diesel vehicles accounted for 40 percent of car sales last fiscal year, twice their share in the previous year. Car sales look set to fall below industry estimates of 10 percent growth this year, as high interest rates and sluggish GDP growth dampen demand.
Over 80 percent of new orders for market leader Maruti Suzuki's Swift hatchback are for the diesel version, while passenger vehicle sales at Mahindra & Mahindra, which almost exclusively builds diesel-powered utility vehicles, are up an annual 30 percent in the first five months of the fiscal year that began in April.
Raising the price of state-subsidised diesel is seen easing New Delhi's subsidy burden and a widening fiscal deficit.
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Readers' opinions ( 14 )
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Ling Raj
To day is Ganesh Caturthy. Italians
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Tetris
Jaitley, you are an MP who have to make policy for the country. What are policies you want to propose and how to implement it. We find you opposing govt for whatever they come up with. Let some boys and girls be sales girls and boys. What is wrong in that. Better than doing your house jobs, man!
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jyotex
I wonder if this would be a wild idea !! All trucks and buses be replaced with a custom made fuel tank with specialty locking devise. This device can only be opened by designated members of a fueling station. So drivers and owners cant open them hence no pilferage and they be allowed to buy diesel at below rate than cars and SUV's !!
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Abhishek
They will find a way... I think its easier then it seems as where there is an inlet there is an Outlet which you cannot lock.
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raghuvir
The govt. should device a way where the transporters are not hurt by the increase in price of diesel. Private car owners should be made to pay excess for the fuel they use for their cars. Let the state govt.'s reduce their levy on diesel instead of blaming the central govt. on each and everything. Let them show the way.
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Sasi
The transporters will in any case increase the freight,which the others will pay.Many transporters carry goods with proper bills and charge double the freight,do these transporters need any subsidised fuel.The government can fix its levies on all petroleum products like excise Rs 10/- per litre VAT Rs 10/- per litre which should not change even if the oil price changes.
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Clayton
First the Govt ,must stop making money on Fuel cut the tax
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