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The Finance Minister, Mr Pranab Mukherjee, on Saturday ruled out the possibility of dual pricing for diesel and excise duty hike.
The clarification comes after Mr Mukherjee's statement in Lok Sabha, which created an impression that driving diesel cars could become costlier.
Addressing a conference on ‘Two Decades of Reforms: The Way Forward', organised by the Confederation of Indian Industry, Mr Mukherjee said, “the economic stakeholders have no reason to fear introduction of any regressive policy measures at any point of time. Thus, for instance, there are no proposals for introducing dual pricing mechanism for diesel or increase in duties for bridging any perceived shortfall in tax revenues.”
On Thursday, in his reply to the debate on price rise, Mr Mukherjee had said that the Government could work out a mechanism to end subsidising diesel-driven cars.
Though he did not give any indication about the mechanism, it was believed that dual pricing or a new taxation regime were in the offing. This hurt automobile stocks badly.
Passenger cars are the second largest consumers of subsidised diesel. The Government admitted in Parliament that trucks lead the pack with 37 per cent share, followed by passenger cars at 15 per cent.
The Government pays subsidy at the rate of Rs 6.08 on diesel, while it is sold Rs 6.82 less than the market price.
The difference of Rs 24 in retail price makes diesel a more preferred fuel than petrol. Though diesel cars are more expensive, that does not discourage consumers from using them. The waiting period for diesel cars and SUVs is up to five months.
It is these factors that prompted members of Parliament to demand withdrawal of diesel subsidy for these cars. However, the Finance Minister's clarification has given some cheer to the auto industry.
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