Oil Ministry seeks hike in excise duty on diesel cars

New Delhi: The Ministry of Petroleum and Natural Gas is demanding an increase in excise duty on diesel cars with a view to discouraging consumption of subsidised fuel by personal vehicle owners.

“A proposal was received from Ministry of Petroleum and Natural Gas for levy of additional excise duty on diesel cars along with their suggestions for Budget 2012-13,” Minister of State for Finance SS Palanimanickam said in a written reply to the Rajya Sabha.

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In order to discourage consumption of subsidised diesel by personal vehicle owners, the Petroleum Ministry had suggested imposition of higher duty on purchase of diesel cars.

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Diesel is the most consumed fuel in the country but is sold at a discount to its imported cost. Luxury cars and SUVs also run on diesel and so do power generators at malls and telecom towers.

It has long been argued that the rich should not get subsidised fuel. According to Oil Ministry estimates, 15 percent of diesel consumption is accounted for by personal cars and SUVs.

Petrol prices were de-regulated in 2010 but the government is yet to take a decision on freeing diesel prices.

The government has budgeted Rs 40,000 crore as fuel subsidy for the 2012-13 fiscal.

In a separate reply, Minister of State for Finance Namo Narain Meena said the government is targeting better management of subsidies under the public distribution system (PDS) so that it reaches the intended beneficiaries.

As per a Planning Commission report using a particular method of measuring leakages, the government spends Rs 3.65 through budgetary food subsidies to transfer Rs 1 to the poor.