More duty on diesel cars to complicate investment: M&M

Auto major Mahindra & Mahindra today said that any hike in excise duty on diesel-run vehicles would result in wrong allocation of resources and complicate the investment environment.

One economic anomaly, which is the distorted pricing of fuel, cannot be corrected by creating another distortion, Mahindra Group Chairman Anand Mahindra told reporters on the sidelines of inauguration of Mahindra Reva plant on the outskirts of Bangalore. Earlier in June, Oil Minister S Jaipal Reddy had written to Finance Minister demanding a hike in excise duty on diesel cars to make up for subsidised fuel being used in vehicles.

Mahindra said such a move would be a retrograde step. He said the suggestion to impose heavy excise duty on diesel-run vehicles would result in wrong allocation of resources and perplex environment for investment.

"We have said this before and will say this strongly. Any duty levied on the point of sale of a product (diesel-run vehicles) to compensate for a distortion upstream is wrong," he added.

Excise duty for diesel cars with engine capacity under 1,500 cc, but the length exceeding four metres is 24%. Diesel driven vehicles having length exceeding four metres and engine capacity of over 1,500 cc are charged with an ad valorem duty of 27%.