The 2012 union budget might look at taxing diesel cars at a higher rate to offset the diesel fuel subsidy!

The gap between the prices of diesel and petrol is widening with every petrol price hike, so much so that petrol car sales have become a trickle when compared to diesel car sales. The carmakers for their part have installed more capacity for petrol cars and this has resulted in huge waiting periods for diesel cars. Cars like the new Maruti Swift Diesel command a waiting period of no less than 6 months. For now, the car buyer is shifting big time towards a diesel car for the higher fuel economy a diesel engine delivers and the lower price of diesel as a fuel when compared to petrol. The honeymoon might not last forever.

Diesel Price Hike

Not if the Indian government, which for long has been talking about offsetting the subsidies that it has been doling out to private car owners and cab operators, who are actually benefiting from the subsidies that the government provides to diesel. The intendes audience of this subsidies however are farmers and the transportation sector like the railways. To correct this seemingly skewed subsidy structure, higher excise tax on diesel engined cars and SUVs has been mooted by government sources and this move could come to fruition at the upcoming 2012 union budget.

If that happens, expect to pay up to INR 30,000-50,000 more for your diesel engined car, further increasing the gap between petrol and diesel engined cars’ initial purchase prices. Currently, a diesel car is expensive by about INR 80,000 to 1 Lakh over a comparable petrol car and this move from the government could make this gap wider. So, you could very well be buying a diesel car that is much more pricier than current levels due to the bump up in excise duty. Will this potential move from the Indian government put the bang back into petrol car sales and will this move actually result in lesser people buying diesel engined cars?

We’re looking forward to your thoughts on this in the comments section below.

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November 24, 2011 | By Jay Prashanth · Tags:

Comments

8 Responses to “The 2012 union budget might look at taxing diesel cars at a higher rate to offset the diesel fuel subsidy!”

Parthiva on November 24th, 2011 12:37 pm

I think this is a great move. Currently I pay high prices for petrol for my Nano while my boss with a diesel S class enjoys the benefits of the diesel subsidy.
Petrol is now the middle class fuel with bikes and entry level cars running on petrol. Its high time we prevent the rich from benefiting from the diesel subsidy
Bharath Kumar on November 24th, 2011 5:09 pm

Pavithra is right and as mentioned in the above post, diesel is for the farmers and commodities not for the rich guys who owns BMWs, audis and the huge unwanted SUVs.

Our Govt. is taking the right action.
Tejus on November 24th, 2011 6:18 pm

I’m in accord as well. With manufacturers quoting higher input costs of diesel engines, it’s not really affordable by the common man. An excellent move by the government if this is indeed implemented.

All said and done, there will be those who will finding a way of getting round the system and try to buy diesel at subsidized prices.
Jay Prashanth on November 24th, 2011 7:16 pm

Tejus,

That is perhaps why the government is planning to look at taxing diesel cars as implementing a variable price for diesel at the fuel station level would lead to more corruption.

Cheers,

Jay
Auto Enthusiast on November 24th, 2011 10:33 pm

1st of all whoever said there is any kind of subsidy on petrol or

diesel if u get to know the level of local state taxes that are levied

on them i think it would put an end to this discussion
Shanthosh on November 25th, 2011 3:20 pm

I think increasing the taxes on diesel cars would reduce the number of diesel cars purchased, but if the government is thinking to reduce the subsidy burden won’t the existing number of diesel vehicles form a substantial amount and still be part of the subsidy burden.

This strategy is to just increase the cash flow to the government and not a long term solution.
liz on January 3rd, 2012 1:18 pm

I agree that a lot of people use diesel cars, and the government does not need to use taxpayers money for funding personal transportation.. the subsidized diesel should only be for water pumps to farmers and power generation in remote villages and for large scale goods transportation vehicles.

it is good that government is thinking to tax diesel cars, so they become unattractive to the average consumer.

diesel cars are a menace to the environment because they pollute the atmosphere more. people buy diesel cars because they are cheaper to run, never thinking of the pollution they cause.
Sarvpreet on February 18th, 2012 8:15 pm

This is right, but the other face of increase tax is the people who already have the diesel cars still enjoys the subsidy. govt. will increase diesel price instead of increase diesel car price or tax.