Praful Patel bats for auto industry, opposes tax on diesel cars

Roudra Bhattacharya New Delhi | Updated on November 13, 2017



Writes to Finance Ministry that diesel use by cars is low

The Union Heavy Industries Minister, Mr Praful Patel, has thrown his weight behind the automobile industry's argument that diesel cars are being unfairly targeted for contributing to the spurt in diesel consumption seen over the past few years.

The calculation on the basis of which an additional excise duty on privately-owned diesel cars has been proposed to disincentivise the consumption of subsidised diesel by ‘affluent' private car owners has been contested by Patel's Ministry.

In a letter to the Finance Minister, Mr Patel argued that “The assumption that 15 per cent of diesel is being used by car owners is not correct and this is actually significantly lower. Correct estimations based on rational assumptions needs to be made before these are used for any policy formulation.”

Based on data from the Planning Commission, the Heavy Industries Ministry and carmakers' body Society of Indian Automobile Manufacturers (SIAM) have argued against the validity of the government's assumption that passenger cars account for 15 per cent of total diesel consumption. Official data available with Business Line point out that the share of personal cars in diesel consumption is below one per cent. In fact, the whole passenger vehicle segment (which includes taxis, jeeps and multi-utility vehicles) has 5.2 per cent share — almost 10 percentage points lower than the 15 per cent number previously suggested.

The 15 per cent number had originally been mentioned in the February 2010, Kirit Parikh Committee Report ‘A Viable and Sustainable System of Pricing of Petroleum Products'.

A higher tax on sale for diesel cars has recently been suggested by the Petroleum Minister, Mr S. Jaipal Reddy and the Parliamentary Standing Committee on Petroleum and Natural Gas.

The primary point of contention is that the 15 per cent reference in the Parikh Report mentions the passenger car segment (private cars), which should instead read as the larger passenger vehicle segment.

“Subsequent to the release of the report by Dr Kirit Parikh an Inter-Ministerial Group meeting was held, where Dr Parikh was also present. During the meeting, it was accepted that certain assumptions made for arriving at estimations for diesel cars merited a re-look,” Mr Patel further adds in the letter.


Another area of debate is the share of the overall transportation sector (passenger vehicles, trucks and buses) in diesel consumption in the country. The Parikh Committee Report says this stood at 64 per cent in 2008-09, but Planning Commission data point out that it was lower at 59 per cent in that period.

In fact, in 2010-11 and 2011-12, diesel consumption by transportation has dropped back to 2006-07 levels to 56 per cent.

“The share of transportation in diesel consumption could have dropped both because of higher consumption by industry, power and agriculture. Also, while diesel car sales have been rising, they have become more efficient and many buses have shifted to CNG,” Mr Vishnu Mathur, Director-General of SIAM said.


Published on December 24, 2011

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