In the wake of a marked preference of personal vehicle owners, more so after the hike in petrol prices, the Finance Ministry is having a re-look at the Petroleum Ministry's proposal to hike the excise levy duty on diesel cars so as to disincentivise consumption of the subsidised transportation fuel.

Indicating to the media that the proposal is still under the government's scanner, CBEC (Central Board of Excise and Customs) Chairman S. K. Goel said: “The proposal is there and that is being examined by Finance Minister. Consultations are being held and appropriate decision will be taken by the government in due course.”

At present, despite the wide gap in the prices of petrol and diesel, the excise duty on petrol cars (with engine capacity below 1,200 cc) and diesel cars (with engine capacity under 1,500 cc) is the same at 12 per cent and exactly double at 24 per cent if the length of the vehicle exceeds four metres.

On the other hand, for petrol and diesel vehicles exceeding four metres in length and engine capacities of more than 1,200 cc and 1,500 cc, respectively, attract a fixed duty of Rs.15,000 along with an ad valorem levy of 27 per cent.

Owing to the heavy subsidy on diesel, an unintended anomaly in consumption of the fuel has been creeping in, leading to increased use of the fuel for private transportation. Luxury cars and SUVs have a diesel powertrain and owing to the pricing difference, the rich have been enjoying the benefits of the subsidised fuel. According to Petroleum Ministry estimates, 15 per cent of the diesel consumed in the country is accounted for by personal diesel vehicles and SUVs and, going by the trend, is set to increase further.

To tackle the problem, the Petroleum Ministry has suggested in its Budget proposal to the Finance Ministry that an additional excise duty should be levied on diesel cars to discourage consumption of the subsidised diesel.

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