The news on petrol price hike and then the reduction, the possible excise duty hike on diesel vehicles has been creating quite a sensation among the Indian customers, automobile companies and of course the political parties. With so much confusion surrounding the crisis situation, no concrete decision has been taken till now. Each day faces a new verdict, a new strategy all together. This is leaving the end customers and the automobile companies in a fix.
Most of the companies have been shifting their focus towards the diesel engine segment owing to the demand generated for the same. Auto majors started making plans to set up complete manufacturing units for diesel engines. That was on the supply side. Coming to the demand side, the consumers switched their preferences to buying a diesel car owing to the rising petrol prices. But, again the situation changed and decisions were freshly taken.
The Government decided to hike the excise duty on the diesel vehicles. This again put the automakers in a confused state of mind. Unable to predict the consequences of such a hike, most auto majors kept their plans of setting up diesel engine units on hold. Auto companies also feared that any hike in excise duty on diesel vehicles will only result in slump in the sales of the entire segment. Currently, atleast the demand for the diesel vehicles is good. If the demand for both petrol and diesel vehicles goes down, then the expected sales figure will never be reached. Also, the country gets 21 percent of the tax collections from this segment which might go down with the slump in sales.
The situation doesn’t end there. The prices for the petrol were brought down and there was news to increase the diesel price by Rs.3. The reason for the same was to remove the massive discrepancy between the two fuel prices. Obviously, the reasoning was more of a ‘politically correct’ statement. Currently, the price differential between the two fuels is around Rs.30. Even with an increase of Rs.3 on diesel, the diesel would still be the preferred option. So, where is the end customer getting benefitted?
After all this, the only hope for the automakers is that the Government may not hike the excise duty considering all the above reasons. Talks are in progress and the Government is indeed considering all these reasons and perhaps we can hope to get the good news confirmed soon.