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Tax bumps ahead for diesel cars

Published on 29 Nov. 2012 10:10 PM IST
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 At a time when diesel-powered vehicles have been driving sales in the country’s otherwise sluggish automobile market, the industry has been hit by a double whammy. First, a proposal to levy an additional annual road tax of up to Rs 50,000 on diesel sports utility vehicles. Second, a suggestion before the Supreme Court to impose an environment tax of 25 per cent (of the cost of the vehicle) on diesel vehicles to curb the growing levels of pollution in the Delhi-National Capital Region.

These have raised concerns in the domestic automobile industry, battling slow sales and high interest rates and fuel prices. “On an average, diesel vehicles are tagged 20-23 per cent higher than ex-showroom prices of petrol variants. Once Euro-V emission norms come into effect, vehicle prices would automatically rise Rs 40,000. If there are additional levies, it would certainly put manufacturers’ investments to increase diesel capacity in jeopardy,” said a senior industry executive.

Estimates show while diesel production capacity rose 35 per cent in 2011-12, production capacity for petrol vehicles fell about 12 per cent. In Delhi, petrol is 43 per cent more expensive than diesel. High petrol prices have led to an increasing number of consumers opting for diesel cars in the last year. In the first half of this financial year, while diesel vehicle sales rose 40 per cent to account for about 53 per cent of the passenger vehicle industry, demand for petrol vehicle fell 20 per cent.

Companies such as Maruti Suzuki, Hyundai Motor India, Volkswagen, Honda Cars India and Volkswagen have announced plans to set up diesel engine manufacturing units in the country to meet the growing demand for diesel cars.

While Maruti Suzuki has committed investment of Rs 1,700 crore to enhance diesel engine production capacity to 3,00,000 units by 2014, Hyundai has approved investment of about Rs 1,600 crore to set up a new engine plant and metal press shop.

On Monday, former Planning Commission member Kirit Parekh said instead of levying a one-time tax on fresh purchases of diesel vehicles, a proposal had been made to the finance ministry to impose additional annual road tax of Rs 10,000-20,000 on diesel cars and an additional annual road tax of up to Rs 50,000 on diesel sports utility vehicles.

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