Cess on diesel car

By Priyanka Chandola
Published: Wednesday 15 October 2008

luxury diesel cars may become dearer and bulk diesel consumers may no longer get fuel at subsidized rates. The Ministry of Petroleum and Natural Gas plans to impose 25 per cent cess on big diesel cars and charge industrial consumers the market price of Rs 57 per litre, Rs 22 more than the current price. The railways and state transport undertakings will be exempted from paying the market price.

The move is to dampen the demand for subsidized diesel in the transport and industrial sectors. Diesel cars are expected to be 50 per cent of the new car sales by 2010.

Due to under recovery of rising cost of fuels, the losses of public sector oil companies per litre of petrol is Rs 16.33, and for diesel Rs 28.12.

It is estimated that the proposed cess on luxury diesel cars will generate Rs 150 crore annually, and diesel sold at market price to bulk users will reduce losses of public sector oil companies by upto Rs 15,000 crore.

The move to slap 25 per cent cess only on diesel luxury cars, however, may not lead to more recovery as smaller diesel cars dominate the market.

Already a high-powered committee under the chairmanship of B K Chaturvedi, member of the Planning Commission, has recommended a metro tax of Rs 2 per litre of diesel in big cities to curb its use in all diesel cars and suvs, and market price of diesel for bulk consumers.

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