The Budget for 2010-11 is just hours away and the auto industry is rife with news that the excise duty on diesel engines which was reduced a couple of years ago would again be increased and this news has certainly not gone down well with the auto experts.
Commenting on the speculation, Pawan Goenka, president of SIAM said, "If there is an increase of excise duty on diesel engines, it would have a really have a bad impact as it is diesel vehicles are costliers than petrol variants. If there is a heavy tax levied, the cost would directly be passed on to the consumer and prices of vehicles will thus go up."
He said that it is time that the governemnt take the bull by the horn and deal with the situation. If such a move happens, there is also a possibility that the diesel cars sales would go down considerably as the price difference between the petrol and diesel vehciles will further widen.
"The possible solution if at all the government has to do is decrease the price of the petrol by Rs 6 and increase the diesel price by Re 1, which would be minimise the gap between the two thus also boosting sales of diesel," Goenka adds. The ratio difference between petrol and diesel today is 1:6 and that needs to be filled urgently.
Diesel vehicles are gaining momentum in India and an increase in the excise duty would mean that the increasing demand will be stalled.
There needs to be a middle road chosen for taxing diesel car users with petrol and those who use diesel vehicles for passenger transport.
On the general notion of how the Budget will be for the auto industry, Goenka said that everyone should be ready for some stimulus reversal and that we have to take it in stride and move on but he also cautioned that if there is a more than two per cent reversal then things might go out of hand. "The situation will become tricky again," he adds.
Fingers are crossed as this is the first Budget since the UPA government was voted back to power and an interesting one that to see how many promises are made and delivered.
