Carmakers hold up investments as government fails to clarify diesel policy

Major automobile firms in the country, including car market leader Maruti Suzuki and Hyundai Motors, have decided to delay investment decisions in new facilities until at least the budget proposals for the 2012-13 financial year are announced on 16 March.

Lack of clarity on diesel pricing policy has resulted in postponing or abandoning of investments of more than Rs3,000 crore by automobile companies in India, according to the Society of Indian Automobile Manufacturers (SIAM).

Demand for diesel cars, however, has seen a sudden spurt and car dealers are reported to be finding it difficult to meet demand for diesel cars, which has risen 30-35 per cent over the past one year amidst talks of additional duty on diesel vehicles and hike in diesel prices.

The Indian preference for diesel cars mainly stems from the high prices of petrol, which is priced at over Rs71 per litre, even though a diesel car is costlier by up to Rs1.5 lakh in the country.

''Many of our members are still unclear whether they should invest on diesel technology or not in India as there is no clarity on how the fuel will be priced in future. This has resulted in more than Rs3,000 crore of investment being held back,'' SIAM director general Vishnu Mathur said.

A number of companies, including Maruti Suzuki, Hyundai Motor India, Ford India, General Motors India and Tata Motors, had announced plans to invest in diesel engine plants.