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Budget 2012-13: With no tax on diesel vehicles, auto makers mull expansion

By Motortrend India Staff   |   18 March,2012

As the Budget has spared diesel vehicles from the much feared additional tax, auto firms such as M&M, Hyundai and Maruti Suzuki are expected to press ahead with plans to expand engine capacities in this segment.

Before the Budget 2012-13 was presented on Friday, Society of Indian Automobile Manufacturers (SIAM) had said that fear of diesel tax and lack of a clear roadmap on diesel pricing led auto companies to hold back investments of more than Rs 3,000 crore in India.

At present, petrol is deregulated but diesel prices are still decided by the government, which provides subsidy on the fuel that is used by the transportation sector and impacts the cost of several essential goods and services.

Rising petrol prices have increased manifold the demand for diesel vehicles over the past couple of years. Hence, of late, there has been strong demand from various quarters for an additional tax on diesel cars.

“As far as M&M is concerned, whatever we have held back on increasing production capacity of diesel vehicles, we will be going ahead now,” Goenka said.

While he did not specify how much investment was held back on diesel expansion, the company had announced that till FY’14 it will invest Rs 5,000 crore on new products and capacity.

Hyundai Motor India Ltd (HMIL), which had put on hold its Rs 400-crore diesel engine plant last year, said it is evaluating the situation after the Budget.

The plant was envisaged to have an annual capacity of 1.5 lakh units for three types of engines -- 1.1 litre, 1.4 litre and 1.6 litre for the domestic market.

Maruti Suzuki India (MSI), which has also been awaiting clarity on the issue, said those companies with diesel manufacturing capacity would be pleased with the Budget’s silence on petrol-diesel price differential.

Asked if MSI would consider going ahead with the plans for increasing diesel engine capacity, company Chairman R C Bhargava said: "We can only say after the project report is completed and considered by the management."

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