It is once again that time of the year when the media is rife with speculation that the automotive industry will have to face another round of increase in taxes. Every year, this is more or less the same story.

A few years back the industry lobbied hard for reduction in unreasonably high excise duties prevailing at that time. The Government accepted the demand and reduced duties, but this year the wheel is spinning in the other direction. The speculation is that the diesel cars and diesel fuel (either or both) may face increased taxes.

Diesel cars, tax

It seems, the Government, possibly advised by ill-informed NGOs and burdened by a big diesel subsidy deficit, will consider increasing the tax on diesel cars and consider the alternative of increasing the cost of diesel fuel. Let me base my arguments against these moves on the following well-established facts.

First, diesel fuel that powers automobiles is not polluting, as is frequently pointed out. It is, in fact, cleaner than gasoline and will help decrease the carbon footprint. Second, it gives a much better mileage than gasoline-powered vehicles, thereby lowering import bills for crude.

Third, if we look at the data for diesel consumption sector-wise, we will find that the diesel consumption by private passenger cars is a miniscule 2.7 per cent and by the so-called premium SUVs only about 0.5 per cent. The point here is that the diesel consumption being so low for passenger cars, will it really make any significant difference to the exchequer if the Government were to increase taxes?

Contrary to the much-touted view that subsidised diesel is only consumed by affluent high-end SUV buyers, the fact is that the bulk of diesel car users are small car buyers, as 95 per cent of the diesel cars fall below the Rs 10-lakh price band, so an increase in either will affect a large number of middle-class consumers. As far as Renault is concerned, the issue is not of change in tax structure or even diesel versus petrol. Renault as a company has both technologies available and in some countries, because of the regulatory norms, we have products only with gasoline engines.

We can have the same for India if the Government so desires, but our problem stems from the fact that there is no long-term, consistent policy or roadmap for the manufacturers to lean on and plan their way ahead. Changing over not only involves large investments, but also requires a big family of vendors and suppliers who also have to adapt to the changes.

The automotive industry is both capital- and labour-intensive with long lead times; so, if any change has to be brought in, the OEMs have to be given a long lead time.

Consistent policy

Overnight changes are impossible and the investment made today keeping in mind the prevailing policies can be at great risk if the roadmap is not clearly established.

We are not against change, especially if it helps the nation go forward and causes social good, but no industry can survive in an atmosphere of uncertainty, and this is exactly what the automotive industry is made to go through almost every year.

What we would like to see from the Government is a long-term, consistent policy guideline which will help us plan and execute better and, if this happens, then we all gain together.

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