Policy

Parliamentary panel calls for cess on diesel cars

Roudra Bhattacharya Richa Mishra New Delhi | Updated on March 12, 2018 Published on December 23, 2011

The panel has recommended that the collection of cess should go for compensating the under recoveries of oil marketing companies

A cess on private diesel cars may become a reality if the Government accepts the recommendations of a Parliamentary panel on petroleum and natural gas.

The Standing Committee on Petroleum and Natural Gas in its report ‘Challenges of Under-Recoveries of Petroleum Products' has suggested levying a “cess on diesel car (private car) to be paid at the time of purchase of diesel vehicle” and has recommended that such collections should go for “compensating the under recoveries of oil marketing companies.”

Opposition

But, the Heavy Industries Minister, Mr Praful Patel, is against it. In a recent letter to the Finance Minister, Mr Pranab Mukherjee, he said, “I would request you not to consider the proposal, if any, for imposition of higher excise duty on diesel cars.”

Today, petrol and diesel cars attract excise duty of 10 per cent (below 4 metres) and 22 per cent (large cars).

The public sector oil marketing companies sell diesel at a Government-controlled price. This results in the companies incurring a revenue loss. Lower tax and a subsidy of Rs 10.83 (as on December 23) on sale of each litre of diesel have resulted in big disparity in retail selling prices with petrol.

The panel felt that since petrol is consumed mainly by private vehicle users and diesel is by mass transport system and agriculture, there is merit in keeping the prices at a lower level.

Consumption

According to Petroleum Ministry data, between April and November this year diesel consumption went up eight per cent to 42.04 million tonnes versus 39 million tonnes.

The panel noted that out of the total diesel consumption, 15 per cent is used by private car owners. The 15 per cent figure is though being refuted by various agencies, including the Heavy Industries Ministry.

“33 per cent of diesel is being used by those sections which are taking unfair advantage of low taxation and subsidy on the fuel,” the Panel said.

It observed that the Government should take steps to exclude these sectors from the net beneficiaries of the subsidised fuel.

While accepting that the subsidy on diesel (fuel) has to be phased over time, like petrol, Mr Patel said, “It is now well established fact that diesel technology today has improved significantly … (They) also have lower carbon emissions, thereby mitigating the impact of road transportation on climate change.”

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Published on December 23, 2011
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