The Union Minister for Road Transport and Highways Nitin Gadkari on Tuesday warned of 10 per cent pollution tax on diesel vehicles, but backtracked hours later amid protest by the industry.

Speaking at the annual convention of the Society of Indian Automobile Manufacturers (SIAM), Gadkari said in the morning that he will personally push for a 10 per cent ‘pollution tax’ on any vehicle run on diesel — be it passenger vehicle (PV), commercial vehicle (CV), cars, or even diesel generators.

“I will seek a pollution tax in the form of additional GST of 10 per cent on diesel vehicles and gensets in order to cut down on air pollution. I have already prepared a letter... I will be meeting the Finance Minister Nirmala Sitharaman today and I will request her that in the coming days, all engines running on diesel should be taxed additional 10 per cent so that there is quick transformation, else it doesn’t seem that people are in the mood to listen,” Gadkari said.

“You can say bye-bye to diesel. I am requesting you. Else, we will increase the tax so much that it will be difficult for you to be able to sell vehicles. But I also noticed that many of you have taken a suo moto decision to reduce diesel vehicles and the number of diesel PVs have come down to 18 per cent now from 53 per cent in 2019,” Gadkari said.

In the PV segment, various carmakers including Maruti Suzuki India, Honda Cars India, Renault India, Skoda Auto India and Volkswagen India have already stopped manufacturing diesel cars.

Automobiles are currently taxed at 28 per cent GST, with additional cess ranging from one per cent to 22 per cent depending on the type of vehicle. SUVs attract the highest GST at 28 per cent along with a compensation cess at 22 per cent.

Industry reaction

“If the decision is implemented, it will impact car sales in the immediate term. Small segment anyway has fewer diesel cars now, so it will impact SUVs the most. In the luxury cars segment, 50 per cent of the vehicles (mostly SUVs) are in diesel right now,” Santosh Iyer, Managing Director and Chief Executive Officer, Mercedes-Benz India, told businessline.

Shenu Agarwal, MD and CEO, Ashok Leyland, said the government’s push for faster adoption of alternative fuels in the auto industry will be better served by additional subsidies on alternative fuel. “While the government is already taking initiatives, we believe some additional subsidies on alternative fuel will accelerate the adoption and provide much needed impetus to the industry,” he said.

Shailesh Chandra, SIAM Vice-President, and Managing Director, Tata Motors Passenger Vehicles, said: “The need from the automotive industry to reach net zero ahead of nation’s pledge of 2070 is pretty much an imperative and the industry will strive to deliver as per the vision of the government.”

Minister clarified

Gadkari later clarified on X that there is no proposal to impose such a tax.

“It is essential to clarify that there is no such proposal currently under active consideration by the government. In line with our commitments to achieve Carbon Net Zero by 2070 and to reduce air pollution levels caused by hazardous fuels like diesel, as well as the rapid growth in automobile sales, it is imperative to actively embrace cleaner and greener alternative fuels. These fuels should be import substitutes, cost-effective, indigenous and pollution free,” he said.