Amid widening price difference between petrol and diesel, the Finance Ministry is looking at the possibility of raising excise duty on diesel cars, a suggestion which was mooted long back by the Oil Ministry.
"Hiking excise duty on diesel cars is still on the agenda. It was not taken up during the Budget. It will take some time. It will happen," a Finance Ministry official said.
To discourage consumption of subsidised diesel by personal vehicle owners, the Petroleum Ministry had suggested imposition of higher duty on purchase of diesel cars.
While the Petroleum Ministry has been asking for a hike in the excise duty on diesel cars, the Heavy Industries Ministry is opposing the move.
The Oil Ministry has argued that the additional amount garnered can be used to make good a part of the loss that fuel retailers incur on the sale of diesel at government-controlled rates.
"There are two views to the proposal. We are trying to work out a consensus. The Budget has just passed and any changes could take some time," the source added.
With the recent hike of over Rs 7.50 per litre in petrol prices, the difference between retail prices of petrol and diesel has widened further. While the per litre diesel price in Delhi is around Rs 40, petrol costs as much as Rs 74.
The Kirit Parikh Committee on Energy had also suggested a one-time additional excise duty of Rs 80,000 on diesel cars, arguing that it would offset the higher excise duty on petrol.
Diesel is the most consumed fuel in the country but is sold at a discount to its imported cost. The government is providing a subsidy of Rs 15.35 a litre to oil marketing companies for selling diesel at lower than market rates.
Subsidised diesel is the preferred fuel for the transport sector (both trucks and passenger buses) and is also used in irrigation pumps and other agriculture equipment.
Luxury cars and SUVs also run on diesel and so do power generators at malls and telecom towers.
It has long been argued that the rich should not get subsidised fuel. According to Oil Ministry estimates, 15 per cent of diesel consumption is accounted for by personal cars and SUVs.
Finance Minister Pranab Mukherjee in Budget 2012-13 has hiked the excise duties for petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc, but the length exceeding four metres to 24 per cent from 22 per cent and a fixed duty of Rs 15,000.
Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively will now be charged with an ad valorem duty of 27 per cent, instead of the earlier 22 per cent and a fixed duty of Rs 15,000.