Under pressure to cut the heavy subsidy on diesel without further fuelling inflation, union finance minister Pranab Mukherjee indicated on Thursday that the government is seriously considering dual-pricing for diesel (See: Government may end diesel subsidy for car), with a higher price for cars running on the fuel.
The Society of Indian Automobile Manufacturers (SIAM) has welcomed the move, saying reduction of the subsidy on diesel used by private cars is a step in the right direction.
Pawan Goenka, the SIAM president, said it has always supported market-linked pricing of automotive fuels. "Petrol pricing is already market based and this move by the government may be the first step in moving towards full market pricing of diesel," he said. "However, the proposed scheme should include only personal use diesel passenger cars.''
Goenka's own company, Mahindra & Mahindra, relies heavily on diesel-powered utility vehicles, in which segment it is the market leader.
Apart from India, diesel is a globally popular fuel. In Europe, over 50 per cent of the cars sold are run on the fuel. Even though it costs about the same as petrol, as diesel engines are considered more fuel-efficient.
Mukherjee said in the Lok Sabha that private cars were consuming about 15 per cent of the diesel supplied in the country; and "we can try to work out a mechanism so that this section is not subsidised".