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Diesel Tax Will Create Uncertainty On Investments: Ford India

By Motortrend India Staff   |   09 June,2012

Ford India on Friday said the government's proposal to impose additional tax on diesel vehicles will create an uncertainty on future investments in the country.

The company that had last year announced an investment of USD 1 billion on a new manufacturing facility at Sanand in Gujarat and another USD 72 million for diesel engine production in Chennai said it would have to "assess" these investments while still going ahead with it.

"Given the current market situation, any additional tax on diesel vehicles will have a negative impact...Action like this creates uncertainty on future investments," Ford India President and Managing Director Michael Boneham said.

When asked if any additional duty on diesel vehicles would impact the current investments, he said: "No, but we will assess our current investments...These investments were made after certain assumptions based on market conditions. If things change we have to look at what kind of capacity we are installing."

The new facility at Sanand was envisaged to initially produce 2.40 lakh vehicles and 2.7 lakh engines per year creating 5,000 jobs. With the USD 72 million at Chennai plant, Ford India was planning an additional output of 80,000 engines by this year to take the total to 3.30 lakh units per annum.

Although Ford is in India for the long-term, he said, "I would have to go back (to the headquarter) to explain these investments", under the circumstances. Boneham said as such the car market in India was struggling as petrol car sales are falling and any hike in excise duty on diesel cars would be a further blow.

"There is a perception that there is a long waiting period for the diesel vehicles which is not the case anymore. Except for one or two models, rest of the diesel vehicles are available readily. We are not fully utilising our capacity at this point of time," he said.

Stating that taxing diesel vehicles is not the solution, Boneham said the auto industry would not have any problems if the diesel prices were raised to be at par with international market prices.

"Taxing diesel vehicle more is very much a short-term solution," he said, adding that Ford India also supported the suggestion of dual pricing of diesel if the government so desired to prevent subsidised fuel being used for personal consumption by car owners.

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