Last year, the excise duty on vehicles and other products was increased to 10%. Rahul Bajaj, Chairman of the Bajaj Group, told CNBC-TV18 that a 2% increase in excise duty, from 10-12%, increases the price of a vehicle by a negligible percentage. "But if the ex-factory price of a car is even Rs 1,50,000 forget Rs 3-5 lakh, that 2% accounts for almost nothing."
He also said that in this year's budget, the government should look at cuttting down the fiscal deficit. The recent recommendation of the Kirit Parikh Committee Report is that diesel automobile should be taxed heavily enough to recover the subsidy on diesel. Bajaj, however, feels that it is more logical to tax the diesel for the cars at a higher duty rather than the cars themselves. "Cars are not guilty, but the fuel is." Below is the verbatim transcript of Bajaj's interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying videos. Q: What most widely expected measures in the budget is that the stimulus given by way of excise cuts should end and the excise duties should back to the 12% from the earlier 10%. What's your take on this expected move? A: I can only speak for the automotive industry, more specifically, only for the two wheeler industry. But talking about the automotive industry as a whole, SIAM, the Automotive Association and CII are all against the rollback of the stimulus which brought it down to 8% in early 2009. Last year the excise duty on vehicles and other products was increased to 10%.Obviously, if you are worried about inflation, increasing it by another 2% would be inflationary. It will be passed on to the customers in 99% cases, if not in every case plus it could hurt the process of growth etc. So, there are negative points and as an industrialist obviously, FICCI with which I am not involved, the CII and SIAM with which I am closely involved, I share their views. Having said that, revenue considerations are important. A 2% increase in excise duty, that is from 10-12%, increases the price of the vehicle by a negligible percentage. But if the ex-factory price of a car is even Rs 1,50,000 forget Rs 3-5 lakh, that 2% counts to almost nothing. We have to cut down the fiscal deficit apart from current account deficit which is a separate issue. Otherwise, the auto industry is by and large is doing well. Q: Just to get to a more controversial topic diesel can
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