Automobile industry body SIAM on Friday said Oil Minister S Jaipal Reddy's proposal of additional taxes of up to Rs 2.55 lakh on diesel vehicles should not be taken up without the approval of heavy industries ministry.
"Any step to increase tax should be done only after the approval of the nodal ministry, which is the Ministry of Heavy Industries and Public Enterprises in this case," Society of Indian Automobile Manufacturers (SIAM) Senior Director Sugato Sen said.
The Department of Heavy Industry (DHI) had made clear its opposition to additional tax on diesel vehicles with Joint Secretary in the DHI Ambuj Sharma stating last week that DHI would be writing to the Finance Ministry on the issue.
Last week, Reddy had written to Finance Minister Pranab Mukherjee demanding a hike in excise duty on diesel cars ranging between Rs 1.70 lakh and Rs 2.55 lakh to make up for subsidised fuel being used in vehicles.
Sen, however, said such a move would be a body blow to the automobile industry, which is already struggling with a demand slump due to high interest rates and high petrol price.
"Petrol vehicles are not selling as such and demand for diesel vehicles are also not as good as it is made out to be," he said.
Car sales in India grew at the slowest pace in seven months during May at 2.78 per cent and stood at 1,63,229 units as against 1,58,809 units in the same month last year.