Wednesday, May 09, 2012
By Shilpa Chopra
Diesel price hike impending, dark cloud hover over car industry ahead of monsoon in India
If you are thinking of buying recently launched Maruti Ertiga diesel car and want to have an India tour this summer vacation, it is the right time to do this as diesel prices could go up soon following the impending rise in excise duty. The Ministry of Petroleum and Natural Gas has asked the government to increase the excise duty on the subsidized fuel and if the recommendations are accepted, an increase in diesel price is almost certain. In its proposal, the Ministry of Petroleum and Natural Gas has reiterated that it is important to discourage increasing diesel fuel consumption by personal vehicles.
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Notably, the demand for taxing diesel driven personal cars was raised even during the budget and following which major car makers such as Maruti, Hyundai, Ford, and Honda had to defer their expansion plans in India. However, the Budget came as a breather and following no change in tax on diesel cars, the car companies triggered their plans in India. Now that the demand has again risen, following which diesel will be a little costlier, the demand for diesel cars in India could receive a check. Significantly, starting 2011 when the petrol prices took an upward swing, demand for diesel cars touched its peak and diesel cars such as Maruti Swift, Maruti Swift Dzire, Tata Indica, and other diesel car models were sold like anything.
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It is worth mentioning that diesel is a highly subsidized fuel as compared to petrol and its prices are determined by the government. Since it is mostly used in agriculture and in industries, the fuel is sold at a subsidized rate. Now that over 15 percent of the fuel is consumed by personal cars, the government is thinking of brining it at a competitive price for personal cars and SUVs. However, car experts believe that rise in diesel price will be derogatory for the car industry that is highly banking on diesel cars. It is expected that the growth of the industry will also retard if diesel witnesses a price rise. Meanwhile, reports also suggest that whatever be the increase in diesel price, it will be nominal and in no case diesel price will be at par with petrol price. Thus making sure that diesel fuel will be cheaper than petrol.