Auto and OMC shares skid on diesel vehicle tax talk, no 'active' proposal, says Nitin Gadkari

Nitin Gadkari's had suggested that he may urge Finance Minister Sitharaman to impose 10 percent additional GST on diesel engines

Shares of car makers and oil marketing companies took a sudden fall after Minister for Road Transport & Highways, Nitin Gadkari on September 12 said that he plans to request Finance Minister Nirmala Sitharaman to impose 10 percent additional GST on the diesel engines/vehicles in order to curb sales. However, Gadkari later clarified no such proposal of additional tax on diesel vehicles is currently under 'active consideration'.

Taking to X, formerly Twitter, the Union Minister said, "It is essential to clarify that there is no such proposal currently under active consideration by the government."

He further added that in line with our commitments to achieve Carbon Net Zero by 2070 and to reduce air pollution levels caused by hazardous fuels like diesel, as well as the rapid growth in automobile sales, it is imperative to actively embrace cleaner and greener alternative fuels. These fuels should be import substitutes, cost-effective, indigenous, and pollution-free.

There is an urgent need to clarify media reports suggesting an additional 10% GST on the sale of diesel vehicles. It is essential to clarify that there is no such proposal currently under active consideration by the government. In line with our commitments to achieve Carbon Net…

— Nitin Gadkari (@nitin_gadkari) September 12, 2023

Earlier today, speaking at the 63rd Annual Society of Indian Automobile Manufacturers annual convention in New Delhi, Gadkari had said, "I am requesting the Finance Minister to impose an additional 10 percent GST on diesel engines/vehicles, this is the only way to phase out diesel vehicles."

Also Read: Proposal to ban diesel cars by 2027: What’s the need? Central Govt yet to accept the suggestion

After the announcement, D-Street reacted negatively leading to pressure on several auto stocks intra-day. Tata Motors shares were trading 2.62 percent lower at Rs 618.05 apiece, while M&M shares are down 2.88 percent at Rs 1,536.55 apiece on BSE.

Swaraj Engines and Ashok Leyland's stocks were also down by nearly 3 percent each after the announcement, with Ashok Leyland trading at Rs 178.30 and Swaraj Engines at 2071.45 apiece.

Moreover, during the event, Gadkari warned automobile companies that the government will increase taxes so much that it will become difficult for companies to sell diesel vehicles.

"Reduce diesel vehicle production or else I will increase tax," Gadkari said. He had also emphasised on the growing focus on biofuels and alternative fuels, noting that this is a top priority as India has joined the Global Biofuels Alliance during the G20 Summit.

"India imports 89 percent of crude oil, which is a significant challenge. Therefore, PM Modi has given the highest priority to alternate and biofuels," added the Union Minister.

Gadkari also asked the auto industry why buses and trucks can't run on ethanol. He also complimented the industry for increasing its focus on alternate fuels and EVs.

Earlier this year in May the government had proposed a ban on Diesel vehicles, the report by the oil ministry which suggested the ban said that India should by 2027 ban the use of diesel-powered four-wheelers in cities with over 10 lakh population and switch to electric and gas-fuelled vehicles.

The shares of Oil Marketing Companies also witnessed a sharp drop, after the announcement, Hindustan Petroleum Corporation was trading at Rs 253.70, down Rs 12.15, or 4.57 percent.  Bharat Petroleum Corporation was trading at Rs 350.00, down Rs 13.70, or 3.77 percent. Indian Oil Corporation was trading at Rs 91.97, down Rs 3.20, or 3.36 percent.

Also Read: Centre cuts windfall tax on domestic crude, hikes levy on diesel, ATF exports