The news of government planning to go ahead with diesel deregulation has dampened the spirits of the upbeat Indian automobile industry. The main issue is that the government is unable to define the extent or time frame for deregulation making it impossible for the industry to plan for it. Many manufacturers have already gone ahead by increasing the production volumes for diesel cars to keep up with the rising demand for diesel vehicles.
After diesel proved to be one of the cheapest fuels to run in India, the demand for diesel cars went on increasing. Customers had to wait for long periods to get their cars. Swift has waiting period of about 6 months while Hyundais range from two to four months. Manufacturers are now looking at a 70:30 diesel:petrol ratio for production and have made arrangements already.
If diesel price gets decontrolled, the resultant hike in diesel price would affect the demand of diesel cars. But, some companies like Maruti are supporting the move saying that it would neutralize the huge shift towards the diesel market.
LPG prices were also hiked twice in the last two months. The prices have gone up 28 per cent, from about Rs. 42 a litre to Rs. 52 a litre, over a period of two months. The green gas, launched by IOC, is no longer an economic option to run cars and hence the sales have dipped according to the dealers.
IOC chief engineer, U P Chattopadhyay, said auto gas is a free market product and the price depends upon international markets. He indicated that the rates may go down in the coming month. We doubt it as companies have rarely gone back on prices.
The policy paralysis of the Congress led, scam marred government is making it difficult for the industry as well as the common man to plan for the future.
