GM recommends Re 1 hike in diesel to end market distortion

Pitching against the idea of imposing 5% levy on diesel cars, auto major GM today said Re 1 per litre hike in diesel prices would fetch more revenue than from the tax and would also address the issue of market distortion.

GM Vice President, Corporate Communications, P Balendran said, "All original manufactures have recommended that right approach will be to increase diesel prices in small doses and reducing petrol rates gradually so that market distortion is addressed and the sector performs well."

"We as well as Society of Indian Automobile Manufacturers (SIAM) has recommended, a hike in diesel prices by Re 1 per litre as it would help government earn Rs 6,000 crore revenue," Balendran told reporters.

The government's revenue earnings from Rs 1 per litre hike shall be three times more as compared to Rs 2,500 crore income from the levy of 5% vehicle tax on diesel cars," he said.

"The Planning Commission has conducted a study and the report has come out saying that privately owned passenger car's consume only 1.03% of the total diesel consumed in the country," Balendran claimed.

"Therefore, what we have recommended is that levy of additional diesel tax is regressive step for industry," he said.

With vast disparity in prices of petrol and diesel, the demand for diesel cars had reached up to 85% and petrol cars had come down to 15%, which otherwise usually remained at 50:50% levels in India.

The petrol prices had touched Rs 78 per litre level in the recent past, while diesel prices have remained stable at over Rs 40-45 per litre or so.