While blaming diesel luxury car buyers for “misusing” the diesel fuel subsidy, the Economic Survey 2011-12 has said that diesel prices need a “large adjustment,” similar to what China has undertaken.
A day before the Budget, the Survey has also suggested “charging high road and vehicle taxes” as an option, in case higher diesel prices are ruled out because of its inflationary impact.
Diesel price adjustments have lagged international prices in recent years, and budgetary subsidies have ballooned, the Survey says adding that, “such low prices and subsidies are providing incentives for misuse, shifts to diesel use such as luxury sports utility vehicles, escalating imports in an energy-insecure country and increased pollution loads.”
The auto industry, however, has been strongly opposing any plans to impose higher taxes on diesel cars citing higher fuel efficiency of such vehicles. It also furnished data to show that diesel consumption is lesser than previously indicated.
Earlier this month, the Union Heavy Industries Minister, Mr Praful Patel had also aligned with automakers in a letter to the Prime Minister, Dr Manmohan Singh. He suggested a correction in the diesel price over time, and evolution of a ‘National Fuel Policy'.
“Attempts to correct fuel subsidy by increasing levies on a particular class of vehicle does not seem to be right and will stifle a technology,” he said, adding that car sales have anyway been under pressure from rising raw material, fuel prices, and higher interest rates.