Ford India against additional tax on diesel engined cars and SUVs!

March 16th will be the day both car makers and car buyers in India will watch with bated breadth, for the Indian Finance Minster Pranab Mukherjee will present the 2012 Union Budget. Of particular interest to car makers and car buyers will be the way the government will swing when it comes to the imposition of additional taxes on diesel engined cars and SUVs, first recommended and later retracted by the Kirit Parikh committee. The petroleum ministry, is however said to be in favor of a higher tax imposed on diesel vehicles to compensate for the subsidy that the Indian government doles out to diesel fuel.

A diesel tank used as an illustration

Car makers though, are opposed to the move of additional tax on diesel vehicles. One such manufacturer is Ford India, whose Managing Director, Michael Boneham has had this to say. Boneham says that diesel vehicles are inherently more fuel efficient than petrl vehicles, which in fact is very true. Secondly, modern diesel cars, by means of turbocharging and direct injection produce less carbon dioxide emissions than an equivalent petrol engined car. Thirdly, diesel is cheaper to import than petrol, due to the cost of production of diesel being lower than petrol.

Therefore, a policy of encouraging more petrol cars by taxing diesel cars at a higher rate will only lead to the petroleum import bill of the country rising. Also, Boneham maintains that only 1% of the total diesel used in the country reflects usage by passenger cars. All these factors point to an argument against the imposition of additional tax that the government might levy diesel engined cars and SUVs with. All said, on the other side of the argument, the contention is that passenger cars and SUVs have no business of takig advantage of the diesel subsidy, which is meant for the agriculture and transport sectors.

Therefore, the 2012 Union Budget will be more of choosing the lesser of the two evils, for the Indian Finance Minister. On which way this debate will swing and as a consequence, the direction in which diesel car prices will head is something that only time can tell. A silver lining though, is that even if the government imposes additional tax on diesel engines cars, the resale value of diesel cars, a figure that is already high currently, will only go up. Watch this space as we track the debate about additional taxes on diesel engined cars closely in the run up to the 2012 Union Budget.

Via TheHindu

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