Driving diesel cars could become costlier. This was indicated by the Finance Minister, Mr Pranab Mukherjee, in his reply to Parliament on the Opposition's motion on price rise.

“I am in agreement with Mr Sharad Yadav (on taxing high-end diesel cars heavily). We can work out a mechanism,” Mr Mukherjee said. He, however, gave no hint on the mechanism to be adopted.

Mr Mukherjee's statement can be interpreted in two ways. One option would be to raise excise duties on diesel cars. Currently, different excise duty rates apply for petrol and diesel cars. However, the difference in engine power gives an advantage to diesel-driven cars.

Experts feel that raising excise duty will be the easier option. Finance Ministry sources had earlier indicated that a decision on duty revision could be taken in the last week of July. Now, the view is to wait till next month when Parliament session gets over and also there will be clarity on tax collection for July and August.

The second option would be do away with the subsidy on the diesel used by cars. Passenger cars are the second largest consumers of diesel using up 15 per cent of total use after trucks (37 per cent). At present, the Government gives Rs 6.08 subsidy for every litre of diesel, irrespective of its use.

Earlier, the Kirit Parikh Committee had also talked about a differential price mechanism — one price without subsidy for one set of consumers, and a subsidised one for consumers like farmers, truck owners, industry, etc. However, this suggestion was not implemented.

Not near comfort level, yet

In his reply, the Finance Minister also said that though the inflation rate had come down from 22 per cent in February to 8.3 per cent at the end of June, this was still not a comfortable level. Mr Mukherjee said that 6-7 per cent WPI was all right but 5 per cent would be the comfortable level.

> Shishir.s@thehindu.co.in

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