India Auto Maker Oppose Diesel Tax image

Major Indian auto makers fear that the rapid-growing auto industry will be hurt by the government’s proposal to raise taxes on vehicles that run on heavily subsidized diesel.

Prime Minister Manmohan Singh’s coalition government put a series of proposal in the last few days, among which the tax hike proposal. The plan to rise excise duties on diesel cars was first issued back in 2010, and now it’s again under debate after the government gave up a more ambitious proposal, to increase the price of diesel and kerosene, used in transport vehicles.

The proposal is currently studied by the Finance Minister Pranab Mukherjee and doesn’t quantify the increase. In 2010 the proposal imposed the tax of 80,000 rupees ($1442), but the auto manufacturers successfully lobbied against it. The Society of Indian Automobile Manufacturers estimated that diesel cars consume less than 7% of India’s fuel sales, but government calculates consumption at nearly 15%.

Although government increased the petrol price, the price for diesel remained unchanged since July 2011, compared to higher international oil prices. Petrol is now 71.16 rupees a liter and diesel is 40.91 a liter in New Delhi.