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Car makers criticise government for not having clarity over the pricing of diesel

By Motortrend India Staff   |   13 September,2011

Top car companies like Maruti Suzuki, Hyundai, Toyota and Mercedes have criticized the government for not having clarity on its stand over the pricing of diesel. They said this uncertainty was hurting investment and sales plans. While some sections within the government have advocated deregulating the price of the fuel to ensure that car owners do not get to enjoy the government's subsidy on diesel, others have demanded that excise and other taxes on diesel vehicles should go up to compensate for the subsidy.

“We do not know what to do,” Maruti Suzuki chairman R C Bhargava said. He said the wide price differential between petrol and diesel had resulted in a huge spurt in demand for diesel vehicles. “However, since the government’s future direction on the matter is not clear, we are not sure how much should we invest in diesel engine technology.”

Heavy industries minister Praful Patel further complicated the government’s stand on the matter when he told an industry gathering last week that there was no move to decontrol the price of diesel. “Diesel and petrol price disparity will stay. It will not go away as we have a social obligation,” the minister said. However, Planning Commission deputy chairman Montek Singh Ahluwalia feels the price of diesel should be freed.

Car companies say their investment plans will alter significantly based on what the government finally decides.

If the government decides to deregulate diesel and its price goes up, then the demand for diesel vehicles will moderate and companies will scale back investments on the fuel. But if the government continues with its present stand that encourages a huge price disparity between petrol and diesel, the demand for diesel vehicles will remain high and the companies will have to make further investments for the fuel.

“We keep hearing many statements and get confused. They need to be clear on the future direction in terms of policy,” Sandeep Singh, deputy MD of Toyota Kirloskar Motors, said. “It’s difficult to work out clear investment and sales plans due to Lack of a concrete policy. It is difficult to change our plans suddenly as we also align our needs with vendors, suppliers and our own production team.”

Clarity was required immediately, said Dabashis Mitra, director (sales & marketing) at Mercedes Benz India. “You have to give enough timeline to companies to implement any policy you finally decide to opt for. Thus, the policy needs to be made clear now.”

“The uncertainty and the confusion led to a delay in our plans to have a diesel engine plant in India. Please remember that anything that the government wants on the regulatory side affects our plans,” said Arvind Saxena, the company’s sales and marketing director. He said the government needs to provide a “clear roadmap” on the way forward. “We cannot change our plans suddenly.”

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