Govt puts diesel price hike on hold; mulls raising excise duty on diesel cars

After the recent uproar over petrol price hike, government in India buckling under the pressure has decided against raising the prices of diesel. Though it cannot be called as an imprudent decision at a time when inflationary pressure is showing signs of regaining momentum. However, amid the broadening price difference between petrol and diesel, the government is now mulling over another unpopular move that is to hike excise duty on diesel cars which will in turn dissuade demand for cars that run on heavily subsidized fuel.

The Oil ministry has been demanding the excise duty hike for quite some time now. Oil minister Jaipal Reddy had called for additional excise duty of Rs 80,000 on diesel vehicles before the Union Budget for 2012-13 was presented. However, after facing opposition from the automobile industry and the department of heavy industries, the proposal was swept under the carpet and no decision was taken.

But now given the huge gap between the retail prices of diesel and petrol, the finance ministry appears to be giving the proposal a serious thought. After the meeting of inter ministerial group  on inflation, the oil minister made it clear that the government is not considering hikes in diesel, LPG and kerosene prices as it could adversely impact inflation and put unnecessary pressure on the economy. The meeting of Empowered Group of Minister (EGoM) on LPG and fuel prices has also been deferred and no date has been fixed yet for the meet.

Though, the price of diesel is likely to remain unaltered, the finance ministry’s decision to hike excise duty on diesel-powered cars would become another point of debate as it would directly impact the sales of automobile companies.