Monday, February 27, 2012
By Manoj Kumawat
Diesel car tax policy to dent already slow car sales in the country
The central government is contemplating an increase in tax on diesel cars in India in this budget. The move is seen to trigger many consequences for the auto industry in India. Significantly, Tata Motors and Mahindra who have their major offerings in diesel will suffer while Honda and Maruti will see a rise in their petrol car takers. With this, there is a third side as well, which is perhaps the most dreaded and that is the diesel cars will be costly to purchase and petrol cars are not viable to own, so car buyers will end up searching for alternatives and the burden on public transports will increase.
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The government is proposing a flat tax of Rs 80,000 irrespective of the price of diesel car even if it is a small diesel car such as recently launched Renault Pulse or it is a BMW X3 SUV. Auto exports believe that the proposed taxing of diesel cars need to be reviewed and the government can alternatively think of increasing the price of diesel by Rs1. This will earn revenue for the government and will not put extra burden on the car buyers besides it will not impact diesel car sales in India.
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Notably, with the unprecedented rise of petrol prices, there was a significant rise in demand for diesel cars in India and companies with diesel offerings sold their cars like hot cakes. Meanwhile, car makers such as Honda that has purely petrol powered cars currently in its line up and Maruti that has mostly petrol cars in its stable suffered huge downtrend in sales. However, sale of Maruti Swift diesel hatchback and recently launched Maruti Swift Dzire CS diesel models showed significant growth. With the budget nearing, auto companies have all lined up against the new taxing policy and have termed as depressing for car industry in India which is already said to be going through a tough stage.
