GM recommends Re 1 hike in diesel to end market distortion

Last Updated: Monday, July 9, 2012 - 20:35

Ahmedabad: Pitching against the idea of imposing 5 percent levy on diesel cars, auto major GM Monday said Re 1 per litre hike in diesel prices would fetch more revenue than from the tax and would also address the issue of market distortion.

GM Vice President, Corporate Communications, P Balendran said, "All original manufactures have recommended that right approach will be to increase diesel prices in small doses and reducing petrol rates gradually so that market distortion is addressed and the sector performs well."

"We as well as Society of Indian Automobile Manufacturers (SIAM) has recommended, a hike in diesel prices by Re 1 per litre as it would help government earn Rs 6,000 crore revenue," Balendran told reporters.

The government's revenue earnings from Rs 1 per litre hike shall be three times more as compared to Rs 2,500 crore income from the levy of 5 percent vehicle tax on diesel cars," he said.

"The Planning Commission has conducted a study and the report has come out saying that privately owned passenger car's consume only 1.03 percent of the total diesel consumed in the country," Balendran claimed.

"Therefore, what we have recommended is that levy of additional diesel tax is regressive step for industry," he said.

With vast disparity in prices of petrol and diesel, the demand for diesel cars had reached up to 85 percent and petrol cars had come down to 15 percent, which otherwise usually remained at 50:50 percent levels in India.

The petrol prices had touched Rs 78 per litre level in the recent past, while diesel prices have remained stable at over Rs 40-45 per litre or so.

So the way forward is to increase the diesel price a little bit and gradually bring down the petrol prices, so even if industry is sluggish the government gets more revenue, Balendran said.

According to GM, the car market in India is expected to grow between 6 percent and 8 percent this year.

"We will also trace a similar growth at GM if the market grows at this pace," Balendran said.

Last month, GM sold 7,364 units in India, off which 5,286 units were of its popular brand Beat including its 4,800 diesel units and 700 Travera.

With the strike ending at its vendors plant, GM is hopeful of making delivery of 2,000 Traveras this month, amongst its fastest selling models in India having a waiting period of upto three months.

"We shall make delivery of around 2,000 Traveras this month," Balendran said adding that with the strike ending at our vendors place, the production of Travera at Halol shall be ramped upto 2,500 units from the 1,800 levels soon.

Within next one month time, Traveras production shall reach from 1,800 to 2,500. It's localisation is 100 percent, he said.

GM has proposed to roll out two new car models Sail (both hatchback and notchback) and Enjoy MPV, in heavy vehicle volume category, in the fourth quarter of this fiscal.

The company plans to ramp up the production capacity at its Halol's facility from 85,000 units per annum to 1.10 lakh units from next year.


First Published: Monday, July 9, 2012 - 20:35

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