The automotive industry of India, backed by the Department of Heavy Industry, has strongly opposed the Petroleum Ministry's proposed hike of additional Rs. 1.70 to 2.55 lacs on diesel cars and Sports Utility Vehicles (SUVs). Society of Indian Automobile Manufacturers (SIAM) had already raised its objection on the hike and was joined by the senior officials of General Motors, Audi India and Toyota-Kirloskar on June 14, 2012.
Senior Director, SIAM, Sugato Sen, said, "Any step to increase tax should be done only after the approval of the nodal ministry, which is the Ministry of Heavy Industries and Public Enterprises in this case."
Showing support to the car companies in their protest, Ministry of Heavy Industries is planning to write a letter to Finance Ministry in order to oppose the points stated by Oil Ministry. Earlier, Jaipal Reddy, the Union Oil Minister, appealed to Finance Minister Pranab Mukherjee to consider the proposed hike in order to compensate for the consumption of the subsidised fuel by passenger vehicle owners.
Reacting to this letter, Vice President, General Motors India, P. Balendran, said, "It is a very regressive step. Industry continues to remain sluggish due to high interest rates, inflation and high fuel prices." He added further, "We are open to market driven prices for diesel. The government should rather increase diesel prices." Balendran stated that the government can earn Rs. 6,000 crores by hiking the diesel prices by just one rupee. This would be much higher compared to the Rs. 2,500 crores that it can generate by levying an additional 5 per cent tax on diesel cars.
The auto industry will cease to generate profits if the additional tax is imposed on diesel cars, according to Michael Perschke, Head, Audi India. He feels that it is unfair to charge only the new car buyers. The tax should be levied considering the consumption and everyone using the subsidised fuel should be taxed.
Likewise, Deputy Managing Director, Marketing, Toyota Kirloskar, Sandeep Singh, said, "It will impact the industry very heavily. This is not a solution. I do not think that the government should go ahead with the proposal as the auto sector is a very revenue generating and employment giving sector."
SIAM Director, Sen feels that the automotive market, which is already limping because of high interest rates and high petrol price, will be hit hard by additional tax on diesel cars. According to him, the demand for petrol as well as diesel cars has deteriorated significantly now.
The sales volumes of the car market stood at 1,63,229 units in May 2012 compared to 1,58,809 units in the same month last year, which marked the slowest growth rate of 2.78 per cent in the past seven months. Just days after the proposal by Reddy, an official of the Department of Heavy Industries lashed out at him for putting forward a proposal concerning a sector that does not fall under his control. However, the Oil Ministry needs to keep down the oil import expenses of the country, as India's diesel subsidies are expected to cross Rs. 1 lac crores by the end of this fiscal.
