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Bone of contention
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New Delhi, June 6: The heads of major automobile companies today met top finance ministry officials to protest the government move to increase the excise duty on diesel vehicles.
They have also urged the government to consider hiking diesel prices to bring it on a par with petrol, a move that will offset the huge demand imbalance between the petrol and diesel cars.
Pawan Goenka, Mahindra & Mahindra president (automotive and farm equipment), P.M. Telang, Tata Motors managing director (India), and Shinzo Nakanishi, Maruti Suzuki India managing director and CEO, were among those who met finance ministry officials today.
At present, diesel cars account for about 40-47 per cent of the new purchases compared with less than 20 per cent a few years ago. The huge price difference (around Rs 25 per litre) between petrol and diesel has led to a shift in demand in entry-level cars, which were previously dominated by petrol variants. According to industry estimates, sales of petrol cars fell 15 per cent in the last fiscal, while the sales of diesel variants grew 35 per cent.
“Petrol car sales are very low in these days as the market sentiment is down ... Normally, we have inventories for three weeks. However, for petrol models, it is now around four-and-a-half weeks,” said Mayank Pareek, managing executive officer (marketing and sales) at Maruti Suzuki India.
According to the auto industry leaders, the price differential between petrol and diesel is not sustainable and the government should take steps to narrow the gap.
“Reducing taxes on petrol can help to bring down the petrol prices and on the other hand, a moderate hike in the administered prices of diesel by Rs 2 to Rs 4 can significantly narrow down the gap between the prices of petrol and diesel without stoking long-term inflation,” said Vishnu Mathur, director-general of auto industry association Siam.
Sports utility vehicles, jeeps, and several premium vehicles sold by Audi and BMW are mostly powered by diesel.
Stating that the auto industry is working in a very “fragile economic environment” in the domestic market, BMW India president Andreas Schaaf said, “any move to levy more taxes on diesel vehicles will be counter-productive”.
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