In the current situation where petrol prices are sky high and people buying diesel cars, the finance ministry is possibly re-looking at the issue of raising excise duty on diesel cars. The same issues was being discussed before the budget but plans were eventually cancelled due to heavy industries opposing the whole idea. But now the petroleum ministry insists that to discourage consumption of subsidized diesel by personal vehicle owners, imposition of higher duty on purchase of diesel cars must be imposed.

The Oil Ministry has debated that the additional amount collected can be used to make good a part of the loss that fuel retailers suffer on the sale of diesel at government-controlled rates. With the recent hike of over Rs 7.50 per liter in petrol prices, the difference between retail prices of petrol and diesel are way too steep. While the diesel costs around Rs. 45, petrol costs as much as Rs 80 in Mumbai. The prices are bound to make customers to opt for diesel cars as running costs are major concern to consumers.

Diesel is the most consumed fuel in the country but is sold at a discount to its imported cost. The government is already providing subsidy of Rs. 15.35 a liter to oil companies for selling diesel at lower than market rates. Subsidized diesel is for the transport sector (both trucks and passenger buses) and is used in agriculture equipment as well. If diesel prices are raised, it will drastically increase inflation. Luxury cars and SUVs also run on diesel and so do power generators at malls, telecom towers and various other places. It has been argued over a long period of time that the rich should not get subsidized fuel. But the main reason for loss to the Government is the multiple levels of taxes state government charges on the fuel.

All though in the Union Budget 2012-13 the excise duties for petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc were increased. Now, are you ready to pay even more extra tax for diesel cars?

Renault Fluence E4 Diesel Engine

– Mohit Soni