Auto industry happy about diesel deregulation

The automobile industry welcomed the government’s move to deregulate diesel prices with effect from Saturday midnight, calling it a much-awaited decision. At present, commercial and utility vehicles run on diesel; 50 per cent of passenger cars sold are also diesel-powered. Diesel cars usually cost Rs. 1 lakh to Rs. 1.5 lakh more than petrol cars.

Industry observers felt customers would not longer have to make a choice of vehicle based on fuel price. Rather, their choice will be driven by individual preferences such as whether the car is for city use or for long distances.“It is a welcome move. We have said that the market should be allowed to determine diesel rates. One cannot expect the government to subside its prices,” Society of Indian Automobile Manufacturers Deputy Director General Sugato Sen said.

He added that as the tax on petrol is higher than that on diesel, there will still be a difference between the prices of the two fuels. Asked if this could impact sales of diesel cars, he said, “People will go by economics, which will give them better mileage. It will no longer be driven just by the price of the fuel.”

R. C. Bhargava, Chairman of country’s largest car maker Maruti Suzuki, said it was an “excellent” move. “That is how it should be. Fuel prices should be governed by market forces.” Asked about the impact on sales of diesel vehicles, the industry veteran said, “Petrol is not regulated and still sales happen. Then why should we regulate diesel prices? As it is, diesel prices were already close to petrol prices.”

Likewise, senior VP (Marketing and Sales) at Honda Cars Jnaneswar Sen said, “Diesel price deregulation by the government is a reform in the right direction. Now customers can decide their car's fuel type depending on their user requirement. Moreover, this will help ease the fiscal deficit of the country.”

Amit Kaushik, principal analyst at research firm IHS Automotive said, “It is going to impact power train [engine, transmission] choices… we are already seeing a shift towards petrol in passenger cars. Diesel of course gives better mileage, but if there is a small gap between the prices of two fuels it would solely be individual’s choice…diesel will be justified when the customer has a long running of over 100 kms a day.’’

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Printable version | Feb 20, 2020 5:02:22 PM |

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