The Petroleum Ministry has once again pressed for imposing additional excise duty on diesel vehicles.
In a letter to the Finance Minister, Mr Pranab Mukherjee, the Petroleum Minister, Mr S Jaipal Reddy, has recommended that an excise duty of Rs 1,70,000 should be imposed on small cars, while medium and larger diesel-run vehicles would attract Rs 2,55,000.
Mr Reddy said that the price differential between petrol and diesel is acting as an incentive for the diesel vehicle users/buyers.
The Ministry has sought imposition of additional excise duty to discourage dieselisation of the economy and get additional revenues which would also help curb the under-recoveries of the oil marketing companies.
The letter also said that under-recoveries on diesel are expected to increase from Rs 81,000 crore in 2011-12 to over Rs 1 lakh crore in 2012-13 at current rate of under-recoveries. At present, under-recovery on diesel is Rs 12.53 a litre. Excise duty differential between petrol and diesel is Rs 12.72/litre.
To equalise these elements there is a need to impose additional duty, the Minister said.
“A rise in diesel car excise duties will not help petrol car sales, nor will it give much revenue to the Government,” said Mr Vishnu Mathur, DG, SIAM.
“In fact, while the petrol car sales are already in a slump, diesel car sales will also drop. The auto industry growth will head into negative then, forcing us to go to the Government for a stimulus package,” he said.
“Instead, we feel there should be Rs 4 increase in diesel prices. This would give more revenue (about Rs 6,300 crore) or enable a Rs 10-12 reduction in petrol prices, while also helping car sales improve.”