Feb 29, 2012, 02.46 PM | Source: CNBC-TV18

Union Budget 2012: Praful Patel says duel diesel pricing not feasible for now

Union heavy industries minister Praful Patel is batting for the auto manufacturers on the diesel duty proposal.

Union Budget 2012: Praful Patel says duel diesel pricing not feasible for now
Union heavy industries minister Praful Patel is batting for the auto manufacturers on the diesel duty proposal .

The Indian auto manufactures, specifically the diesel auto manufacturers, are concerned about an additional excise duty on diesel cars in Union Budget.

Speaking to CNBC-TV18, Patel said dual diesel pricing is not feasible right now. "We have not pitched for hike in duty for diesel vehicles," he said adding, "diesel is an efficient fuel and we can't discourage its consumption."  

This industry wide opposition comes especially in the wake of a slump in car sales this fiscal.

Meanwhile, with just one-and-half months left to meet the Rs 40,000 crore disinvestment target for this fiscal, a panel of ministers recently okayed stake sale in ONGC in this fiscal. However, divestment in BHEL is expected anytime in FY13.  

Clarifying his stance on the matter, Patel said, he is opposed to the timing and not the FPO itself. “The power sector perception in the stock markets is at the moment not very bright. All the scripts are taking beating at the stock exchanges and the second part is that BHEL also is not at the moment very well priced and we do not want to sell,” he told the channel.

Below is an edited transcript of his interview with Shereen Bhan. Also watch the accompanying videos.

Q: The big worry as far as the Indian auto manufacturers, specifically the diesel auto manufacturers, are concerned is will the budget impose an additional excise duty on diesel cars. You had an inter ministerial group meeting which was not attended by the finance ministry as well as the oil ministry but a decision was taken not to impose additional excise duty on diesel vehicles?

A: No, I don’t think there is any decision. Budgets are not discussed in advance but the fact is there is a thought process in the country that diesel is increasingly being used by the passenger car segment as a result of which people who shouldn’t be subsidized with cheaper diesel are getting advantage of that.

The fact is that if you break up the consumption of diesel in the segment which we consider as people for whom diesel who shouldn’t be subsidized, it won’t amount to more than 5% of the diesel consumption because bulk of it is used for industry, for transportation, by the railways and so on. Even cars are using diesel; there are a lot of these Boleros which are in use in the villages. You can’t really classify them as cars which do not need subsidy.

Q: So you are backing the auto manufacturers and Society of Indian Automobile Manufacturers (SIAM) which has been making pretty much the same pitch that the consumption is extremely low as far as diesel vehicles are concerned. Hence if you wanted to tax this, it would be counter-productive. You have actually proposed to the prime minister that there should be a hike in diesel prices as oppose to a hike in excise duty on diesel vehicles?

A: The industry, per se, has no problem with the price of diesel but there is an issue in our country in terms of the subsidies, which should be given to a particular segment, which is important. So, we can’t do away with dual pricing immediately. It may be done over a period of time.

Q: But haven’t you pitched for a higher hike in diesel price?

A: No. We haven’t pitched for that. We are only saying that the industry needs clarity because diesel cars and SUVs are going to be increasingly more in production. All over the world, diesel is considered as a cleaner fuel and much more fuel efficient in terms of mileage. So it is the fuel of the future in terms of cars. Europe, which is actually the most environmentally assertive and conscious, is moving more towards diesel cars.

Q: Have you been able to convince your colleagues that they shouldn’t hike excise on diesel vehicles?

A: That’s what I want to say that I cannot prejudge what's coming in the budget. The fact is if every ministry and every sector has a wish list, one of them naturally will be that we shouldn’t look at imposing higher tax on diesel vehicles because in the long run we will benefit more by way of lesser pollution, and more importantly, by way of fuel consumption.

We import fuel and it will mean that we get more mileage with lesser consumption of fuel. So it's a long term thing. In the short term, may be when the finance minister is really balancing his budget, I don’t know which way he is going to look at it, I can't look into what he is going to be doing but the fact is that is the wish list which we have sent.

BHEL stock price

On November 30, 2015, Bharat Heavy Electricals closed at Rs 175.45, down Rs 0.5, or 0.28 percent. The 52-week high of the share was Rs 299.50 and the 52-week low was Rs 173.00.

The company's trailing 12-month (TTM) EPS was at Rs 3.80 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 46.17. The latest book value of the company is Rs 139.26 per share. At current value, the price-to-book value of the company is 1.26.

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