After initially pitching for not raising the excise duty on diesel cars, the Ministry of Heavy Industries has now tried to put the ball in the Finance Ministry's court.
“Let the Finance Ministry make a case for hiking duty on diesel cars, then we will consider it,” a top Heavy Industries Ministry official said.
The Heavy Industries Minister, Mr Praful Patel, had written to the Finance Minister, Mr Pranab Mukherjee, last month asking him to consider not increasing duty on diesel cars.
Tax clarity
The Industries Ministry says clarity on the tax policy on diesel cars is needed from the industry point of view. “Companies have plans for investment on diesel cars. They can decide only when they know the policy stand,” the official said.
With losses on diesel, which is sold below cost, reaching Rs 14.57 a litre for the fortnight starting January 16, the three government-owned oil marketing companies are expected to incur a loss of Rs 12,950 crore during October-March 2011-12.
Armed with this figure, the Petroleum Ministry is pressing for hiking duty on diesel cars as a means to discourage the rising sales of these cars.
But estimating how much of the growth in diesel consumption is contributed by cars is proving difficult. A senior official in the Finance Ministry said, “We have got data on diesel consumption and also the auto sales numbers.” The Ministry wants to examine the data more carefully before taking a call on duty hike as it could affect sales, he added.
There is also an issue on who uses how much. One set of data suggests that private cars, including sports utility vehicles, could account for around 5 per cent of diesel consumed, while the Heavy Industries Ministry believes that it would not be more than 3 per cent. Diesel is cheaper by Rs 24.73 to Rs 26.29 in the four metros.