Friday, August 5, 2011

Dual rates for diesel


The government may introduce dual rates for diesel — with the price of the fuel higher in cars and commercial power compared with the price for truckers and farmers — to prevent its misuse.

During a parliamentary debate on the price rise, Opposition leaders asked finance minister Pranab Mukherjee if the government would withdraw subsidy benefits on diesel used by premium cars and commercial users such as telecom tower companies, malls and restaurants.

“We can accept your suggestion and work out a mechanism so that the (privileged) sections are not subsidised,” Mukherjee said.

Of the total diesel sold, passenger cars, 8 per cent by power plants, 12 per cent by agriculture and 37 per cent by trucks used 15 per cent.

On Sunday, Mukherjee said the government was keen to free the prices of diesel and cooking gas (LPG) to keep its finances under control.

Diesel is the main transport fuel used by trucks and buses. While petrol rates have recently been linked to market prices, the government gives a subsidy of Rs 6.08 per litre on diesel.

Subsidised diesel is also used in irrigation pumps, agriculture equipment and power generators at malls and telecom towers.

Recently, automakers such as Maruti Suzuki and General Motors and even premium carmakers such as Audi and BMW have introduced diesel variants to meet growing demand from consumers.

Mukherjee’s comments on the dual pricing of diesel affected the Mahindra & Mahindra (M&M) counter, shares of which plummeted 4.45 per cent, or Rs 31.65, to Rs 679.25.

“M&M may be impacted the most if this were to happen as most of its utility vehicles are run on diesel,” an auto analyst said.

However, as per Pawan Goenka, president, automotive and farm equipment sector at M&M, the company would not be affected significantly in terms of demand, as customers were unlikely to shift to petrol vehicles in a hurry.

He, however, admitted that a hike in excise duties on diesel cars might impact sales.

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