Diesel vehicles to get more expensive again?

[Gilead]

2L to 3L diesel tax coming soon! Bwhahahaha

[shishirbn]

2L to 3L diesel tax coming soon! Bwhahahaha

I need to slow down my burnout on KMS in my truck I guess. Hope to take this for another 10 years instead of paying again 3L extra for a new one.

[Ironhide]

Jaipal Reddy is back again


NEW DELHI: If the government accepts oil minister S Jaipal Reddy's proposal, the price of small diesel cars could soon rise by Rs 1.7 lakh while medium-to-large guzzlers could become costlier by Rs 2.55 lakh a piece.

The proposal to impose additional excise duty on diesel cars is bound to trigger protests from automakers, who have seen sales growing at the slowest pace in seven months in May. Domestic car sales declined 24% in May compared to the year-ago period due to high fuel prices and interest rates.

The proposal drew a thumbs down from analysts and private players, who described it as an excuse to avoid fuel pricing reforms. "From the RBI to C Rangarajan, head of the PM's Economic Advisory Council, everyone has recommended deregulation of fuel prices. If you can't do that for political reasons, at least fix subsidy on diesel and then let the market determine the pump price. Taxing vehicles would serve hardly any purpose," said an industry analyst requesting anonymity.


But Reddy has his arguments for seeking taxing diesel vehicles that are outpacing petrol car sales. In a June 7 letter to finance minister Pranab Mukherjee, the oil minister gave three key reasons for his proposal aimed at arresting a ballooning fuel subsidy bill.

Reddy pointed out that the proposed additional excise duties are equivalent to the minimum benefit that a diesel car owner derives from the fuel's price differential with petrol — at current prices — over a 10-year assumed life of a vehicle. Petrol in Delhi costs Rs 71.16 a litre against Rs 40.91 for diesel.

Reddy's arithmetic goes like this: he first calculates the total distance a vehicle is expected to clock in its 10-year life span, assuming an annual run of 18,000km. Then, he works out the fuel costs by taking a median mileage of 18km to a litre for small cars and 12km for medium/large vehicles. For good measure, he shaves off 10% of the total cost to level.

According to Reddy's calculation, the additional excise duty amounts to asking the diesel car buyer to pay upfront the price differential with petrol that he or she would enjoy later. A petrol car owner, in contrast, shells out every time at the pump.

Reddy also pointed out the adverse impact of increased diesel car sales on the government's earnings. Petrol attracts an excise duty of Rs 14.78 per litre against Rs 2.06 a litre for diesel. So each time a buyer opts for a diesel car instead of petrol and visits a petrol pump, the government loses Rs 12.72 in excise duty on litre of diesel. Together with the Rs 12.53 a litre subsidy on diesel, the actual price differential with petrol at Delhi works out to Rs 25.75 a litre.

To drive home the enormity of the situation arising out of this increasing dieselization, Reddy says diesel consumption rose by 7.6% in 2011-12 against 6.2% in 2010-11. In contrast, growth in petrol consumption fell from 10.7% in 2010-11 to 5.6% in 2011-12.

The Kirit Parikh Committee on fuel pricing reforms had recommended an additional excise duty of Rs 80,000 in February 2010 when duty difference on petrol and diesel was Rs 9.75 a litre and under-recovery on petrol was more at Rs 3.97 a litre than Rs 2 on diesel.

Increase duty on diesel cars up to Rs 2.5 lakh: Jaipal Reddy - The Times of India

[AuToHuB-InDiA]

The present Indian economy scenario have gone deteriorated tremendously in last few months. Petrol vehicle owners were in trouble with a high increase of Rs5.50/litre (after Rs2 reduced). Now its turn for Diesel vehicle owners and buyers. Petroleum minister Mr. Jaipal Reddy have sent a letter to Mr Pranab Mukherjee, suggesting him to increase prices of entry level diesel vehicles by Rs1,70,000/- and prices of medium and large diesel vehicles by Rs 2,55,000/-.

This is really shocking. SIAM have approached to the government on this issue and requested to stop this approach as it will harm the car sales which is already reduced due to petrol price hikes.

Reference: Special tax on diesel cars may increase prices by Rs 2.55 lakh - The Economic Times

[xander]

Let me think positively.. Does this mean my diesel car will fetch a better resale price?

[Carma]

Will the Govt have the guts to do this? Automakers would be up in arms against such a move. Some companies like Ford and GM are surviving on their few diesel offerings. If the Govt comes up with such a policy, they would be forced to shut shop in India.

[speed79]

Will the Govt have the guts to do this?

This govt has guts only to increase duty on diesel cars. It does not have guts to deregulate diesel prices. So one can expect insanely increased duty on diesel cars.

[roadracer]

This is a senseless decision by the Govt. The way forward would have been to deregulate diesel prices and have uniformed pricing. But nothing sensible is expected from UPA-2. It's one of the worst, if not the worst, to have governed India.

[AuToHuB-InDiA]

Now it is time for Electric vehicle tech to get into acceptance.

[Ironhide]

One stupid statement / suggestion by "S Jaipal Reddy" and below is it’s effect.


Auto stocks fall on diesel duty concerns, M&M worst hit


Auto stocks were the biggest losers in a flat Mumbai market Wednesday. Sentiments turned negative after Petroleum Minister S Jaipal Reddy recommended a steep Rs 2,55,000 additional tax on large and medium sized diesel cars and Rs 1,70,000 on small diesel cars.

The additional duty is being planned to compensate the heavily subsidised diesel prices, which powers much of the economy, especially in rural areas and in transportation.

Demand for diesel-powered vehicles has surged, accounting for more than 40 per cent of new car sales in India in the year to March 2012 or double their share in the previous year.

Almost all of the large, expensive SUVs and jeeps bought by the newly wealthy are powered by diesel, as are many of the luxury saloons sold by Audi or BMW.

Growing diesel consumption is a major headache for a country grappling with ballooning budget and current account deficits and which imports more than 80 per cent of its fuel needs

Shares in Mahindra and Mahindra traded 1.5 per cent lower at Rs 685. The company is completely dependent on diesel cars, which contribute 99 per cent to its sales. M&M’s profitability could get impacted if it partially absorbs the proposed hike.

Diesel cars comprise 48 per cent sales of Maruti Suzuki and the proposed hike could hit margins, which are already under pressure. The move will also increase the long waiting period on the company's popular diesel models. 70 per cent sales of Tata Motors' come from diesel cars and the proposed hike could create a slowdown in its utility vehicles segment.

Shares in Maruti Suzuki, India's biggest car maker, were down 2.8 per cent at Rs 1,114, while Tata Motors shares traded 1.1 per cent lower at Rs 240.20 on the BSE.

All these stocks underperformed the BSE auto index, which traded 0.94 per cent lower.

Last week, executives from Tata Motors, Maruti Suzuki, Mahindra & Mahindra and Ford had argued against increasing the excise duty on diesel vehicles at a meeting with finance ministry officials.

The Society of Indian Automobile Manufacturers (SIAM), an industry lobby group, estimates that diesel vehicles consume less than 7 per cent of the fuel's sales in India, but the government puts the figure closer to 15 per cent.

The government has increased the price of petrol while diesel has remained frozen since July 2011. At 40.91 rupees per litre in New Delhi, diesel is 43 per cent cheaper than petrol.

Auto stocks fall on diesel duty concerns, M&M worst hit