Govt panel divided on imposing upfront tax on diesel vehicles

The government appointed expert group on low carbon strategies remained divided on the issue of imposing upfront tax on diesel vehicles particularly Sports Utility Vehicles (SUVs).

"Some of the members felt such an upfront tax would be unfair to the manufacturers as upfront costs are important determinant in vehicle choice," as per the report submitted to the Planning Commission here.

They felt "it may simply get rid of the relative distortions in fuel prices by letting petrol and diesel be priced on the same footing, and let fuel efficiency and technology govern the choice of vehicle for the consumers".

However, differing with the view, Chairman of the expert group Kirit Parikh said, "If you are putting heavy tax on petrol because it is for luxury consumption and if you don't want to put the similar tax on diesel, then obviously we have to put the same kind of tax on diesel vehicles like SuVs and others."

"...If the government desires, it could consider imposing an upfront tax on personal (diesel) vehicles," he added.

The idea of imposing upfront tax on diesel guzzling SUVs was mooted by the Environment Minister Jairam Ramesh who had said, "Use of vehicles like SUVs and BMW, in countries like India is criminal."

He had made this suggestion saying such vehicles emit more carbons.

People prefer to buy diesel vehicles because it is not only cheaper fuel option but also gives better mileage. The current price of diesel is Rs 37.75 per litre compared to Rs 58.37 per litre on petrol in Delhi.

At present, the oil marketing companies are losing out Rs 18 per litre on diesel as it falls under regulated price regime of the government. The companies are selling the petrol which is partly deregulated, at an under recovery of Rs 7.5 per litre.

The government keeps diesel price under control to keep a tab on inflation as the fuel is major input for logistics in the country.