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SIAM discusses the future of diesel in India
The paradigm shift of the Indian motorist towards diesel cars has been constantly under debate. The increased gap between diesel and petrol prices (owing to subsidies on diesel to protect the agricultural sector) has driven people towards diesel passenger cars across the scale. The result is a massive subsidy bill that has led to fiscal under recoveries for the government, leading to inflation.
The Society of Indian Automobile Manufacturers held a discussion on the theme of ‘Diesel for Future: Economy and Environment’ with members of the government and automobile industry to find a way to stabilise the situation.
In the opening address, Lowell Paddock, President and MD, General Motors India, stated that car manufacturers should hold the option of producing vehicles of a fuel type based on market demand rather than be regulated by taxation policies. He went on to talk about small capacity forced induction diesel engines and the way downsizing has and will in the future allow considerable efficiency from diesel engines.
Paddock commented that China and USA that are primarily petrol car markets will also experience higher demand for diesel cars due to improved technology and efficiency.
Ashok Dhar, President, Industrial Marketing, Reliance Industries, proposed that developing different grades of diesel for farm and railway sector and selling it at subsidised prices could be a way forward while passenger car grade diesel would be sold at market prices.
Dr Kirit Parikh, Chairman, IRADe, talked about the rising levels of pollution caused by higher numbers of diesel vehicles. This is caused by adulterated diesel mixed with kerosene as kerosene has higher subsidy on it than diesel. Unless this issue is tackled, pollution caused by diesel vehicles will be on the rise. A preventive measure is needed from the government to tackle the issue. Parikh said diesel prices should be regulated by market prices only. According to calculations, if diesel prices are no longer subsidised then inflation will rise by two per cent in the next four quarters, after which inflation will fall below current the rate. So subsidies must be removed now in parts (small diesel price hikes) to take care of fiscal under recoveries.
Another way would be to tax diesel vehicles further by making them more expensive. However, that payment can be broken down to monthly or annual instalments from buyers. This according to him should make customers go in for a more rational decision while buying a car, thereby bringing down the under recovery figure brought by subsidised diesel. This is a move that is needed to give stability to the government.