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Government Plans Huge Taxes On Diesel Cars
If the oil ministry's proposals are accepted, the price difference between petrol and diesel cars will become even larger than existing levels. The government has been planning to raise taxes on diesel cars soon after demand for diesel cars starting increasing.
Diesel cars are now more attractive than petrol cars as the former offers better mileage. The huge price difference between petrol and diesel also makes diesel cars the preferred choice among buyers. The increased of sales of diesel cars has lead to the government to believe that its subsidy bill on diesel had increased and it needs to recover the costs from the car buyers.
The government's plans has been criticized both by carmakers and industry analysts alike. Carmakers have asked the government to sell diesel without any subsidies to private vehicles to reduce the subsidy bill. Further carmakers feel this increased tax will further dampen sales which has been growing at their slowest rate in the past seven months.
Unnamed government officials have said the finance ministry had responded positively to the oil ministry's proposal. However industry insiders feel any new diesel car tax will make them unattractive to buyers. Petrol cars are not expected to get any boost out of this decision as buyers are very skeptical about future petrol price hikes.
Any new diesel car tax will severely impact major carmakers such as Mahindra, Toyota and Ford as they sell more diesel cars than petrol ones. In fact 99% percent of the cars sold by Mahindra are diesel powered. Maruti Suzuki and Hyundai will also be affected as they have invested heavily in boosting diesel car production.
The Oil ministry has calculated the diesel car excise duty on the basis of an assumption that a diesel car will run an average 18,000 kilometres per year and for a period of ten years. Considering the mileage of a small diesel car at 18kmpl and a large diesel car at 12kmpl, the diesel car tax of Rs.1.55 lakhs and Rs.2.55 lakhs is equivalent to the savings achieved buy car users by using cheaper diesel.
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