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Rediff.com  » Business » Additional tax on diesel cars will be a retrograde step: M&M

Additional tax on diesel cars will be a retrograde step: M&M

February 09, 2012 15:34 IST

Terming the calls for imposing additional tax on diesel vehicles as "retrograde", homegrown auto major Mahindra & Mahindra said such a move will only further impede growth of the industry which has had a difficult year in 2011.

Reacting to issues raised from various quarters over usage of subsidised diesel fuel for "luxury" and seeking imposition of additional tax to the tune of Rs 80,000 on diesel cars, the company said use of diesel fuel for luxury personal vehicles is less than 0.2 per cent.

"In my opinion to consider an additional tax on diesel vehicles is a retrograde step..." Mahindra & Mahindra President (Automotive and Farm Equipment Sectors) Pawan Goenka said.

Urging the government not to consider such a move, he said: "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".

Explaining why such a move would prove counter productive, Goenka said: "A tax on diesel vehicles will further impede growth of the industry which has had a difficult year in 2011".

As per SIAM data domestic car sales grew by 4.24 per cent in 2011 to 19,46,373 units from 18,67,246 units in 2010 and in the fiscal 2010-11, out of a total of 21,60,153 passenger cars sold in the country, 28.42 per cent was diesel, while that of petrol was 71.58 per cent.

Goenka said even the expert committee report headed by Kirit Parikh, which had earlier claimed 15 per cent of diesel fuel is used for personal diesel vehicles, has corrected the figures.

"This report had some erroneous data and Parikh himself has recently said that such a tax is not justified. Unfortunately, those who support a diesel vehicle tax are still quoting the data from Dr Parikh's report," he said.

It has been calculated that the use of diesel fuel for personal vehicles is only about 2 per cent of total diesel consumption, he added.

Refuting allegations that subsidised diesel fuel is benefiting the affluent, Goenka said: "The fact is that even within the very small percentage of use of diesel fuel for personal vehicle, a small fraction, less than 10 per cent is used for luxury vehicles. Thus, the use of diesel fuel for luxury personal vehicles is less than 0.2 per cent."

As per a study conducted by Society of Indian Automobile Manufacturers (SIAM) out of a total of 61.68 million tonnes of diesel consumed in India across various sectors during 2010-11, diesel personal cars consumed only 1.03 per cent, while for diesel taxi segment it was at 1.82 per cent.

Highlighting the superiority of diesel fuel, Goenka said: "It is well known that diesel vehicles are 20-25 per cent more fuel efficient and emit 15-20 per cent lower green house gases".

He said additional tax on diesel cars will deter the growth of the technology.

"Diesel vehicle technology is inherently more expensive and hence customers are already paying a premium for owning diesel vehicle. Therefore any further tax will be discouraging a technology that should indeed be encouraged".

There has been opposition on usage of subsidised diesel on passenger cars. The Centre for Science and Environment had demanded an additional duty of up to Rs 1.62 lakh on   big diesel cars to prevent the misuse of subsidised fuel for luxury.

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