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These are the times where the Auto Industry is already going through a rough patch and diesel subsidy is adding to government’s woes. 

After the government deregularized petrol, our market has shown a sudden shift towards diesel cars.

A former Planning Commission member and Presently head of Integrated Research and Action for Development, Mr. Kirit Parikh has said that there is a proposal to levy an annual road tax which is higher by up to Rs. 50,000 for diesel SUVs has been made to the Finance Ministry to help reduce the fuel subsidy burden.

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However, any such extra tax on an already highly taxed segment would spell disaster for the industry. Mr. Parikh thinks that diesel prices should be made market-driven after fixing the subsidy cap at Rs. 9 per Liter. In order to fix that subsidy, he suggests: “Instead of looking at a one-time diesel tax on new purchases, the alternative could be to abolish the existing one-time road tax and make it annual and apply a differential between petrol and diesel vehicles”.

Suggestion is that this additional tax can be higher by Rs 10,000 to Rs 20,000 for diesel versions of normal cars. And more significantly, it should be higher by up to Rs 50,000 for diesel SUVs.

Naturally, this development drew a lot of flak from the Auto Industry which is reeling under a lot of pressure from low sales. Society of Indian Automobile Manufacturers (SIAM) Vice-President, Mr. Vikram Kirloskar said that 45 percent of selling price of a vehicle is tax and any additional tax does not make sense.

Instead, the suggestion given by him was to deregulate diesel prices and make them market driven. Whatever result this development gets, its evident that the market dynamics have shifted towards diesel driven cars and there needs to be a concrete and efficient method to bring the balance back.

What do you think should be it?

 

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Source: Business Standard

Arghya Pan


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