In the run up to the 2013 Union Budget that’ll be presented by the Indian Finance Minister Mr P.Chidambaram on the 28th of February this year, diesel SUVs could be slapped with a higher excise duty, one that could result in their prices going up by quite a bit. For now though, this bit of buzz is firmly entrenched in rumorland, as we get to hear similar rumors surfacing before every year’s union budget. If indeed the budget imposes an additional excise duty on the diesel SUVs, the move will deliver additional revenues for the Indian government.
The Indian government is expected to use such revenues gained from the higher excise duty on diesel powered cars to reduce the subsidy burden incurred due to the heavy subsidies that the Indian government doles out on every liter of diesel sold in the country. All said, a hike in excise duty for diesel powered SUVs doesn’t make sense if the reason for such a hike is centered around the assertion that diesel powered SUVs are less fuel efficient than other diesel powered cars. In fact, many diesel SUVs like the Renault Duster and Premier Rio are actually more fuel efficient that many diesel powered sedans.
So, in such a scenario, we wonder who the entire spectrum of diesel SUVs can be painted with a single brush stroke of being less fuel efficient. Also, a diesel engine is inherently more fuel efficient than a petrol engine. So, calling diesel engined cars or SUVs less fuel efficient doesn’t cut the ice. Given that the Indian government has partially deregulated diesel fuel prices, the hike in excise duty for diesel powered SUVs doesn’t seem too likely as the subsidy burden faced by the Indian government will eventually be eased through the monthly price hikes on diesel.
All said, car makers like Mahindra, Tata Motors, Renault and Ford will be watching the 2013 Union Budget with bated breath as any hike in excise duty will effect these four car makers the most.Most of Mahindra’s best selling cars happen to be SUVs and the same is the case with Renault as well. Tata Motors also has a range of SUVs while Ford is all set launch its big volume SUV in India, in the form of the EcoSport compact crossover. So, any hike in excise duty on diesel powered SUVs could impact the EcoSport’s pricing quite hard.