New Delhi, June 4: Car makers fear a slump in sales if the government goes ahead with its plan to hike the excise duty on diesel models.
S.K. Goel, chairman of the Central Board of Excise and Customs, today said the finance ministry was examining a duty-hike proposal to discourage the consumption of subsidised diesel.
Car sales grew a measly 2.19 per cent in 2011-12. In April, growth stood at 3.5 per cent, impacted by the economic slowdown, excise duty hike and rising interest rates.
"Talks are being held and an appropriate decision will be taken by the government in due course," Goel said.
"With the petrol price hike, sales of diesel cars have kept the demand going in the automobile sector. In case diesel excise duty is hiked further, growth could slump into the negative territory, which will also impact government revenues," Vishnu Mathur, director-general of the Society of Indian Automobile Manufacturers, told The Telegraph.
Industry players said diesel vehicles account for 40-47 per cent of the domestic market. The share of petrol models has been on the decline since the fuel was deregulated in 2010.
Mathur said the excise duty on both petrol and diesel cars had been hiked in the recent budget, making "personal mobility in India the highest taxed commodity".
In Budget 2012-13, excise duty on diesel cars with an engine capacity below 1,500cc but a length exceeding 4 metres was increased to 24 per cent. For cars with over 1,500cc engine capacity, the duty was 27 per cent. The levy on petrol vehicles was also raised.
"The government should provide a level-playing field for petrol and diesel vehicles so that the buying decision depends on a consumers' desire for a particular vehicle and not government subsidy," said Jnaneswar Sen, senior vice-president (marketing) of Honda Siel.