Parikh panel moots extra tax on diesel cars, SUVs

A committee of the Planning Commission on 'low carbon strategies for inclusive growth', headed by Kirit Parikh, has revived the proposal that diesel cars and sports utility vehicles should carry a higher tax.

Diesel cars are popular in India because state-administered diesel prices are pegged considerably lower than petrol. The committee thus suggested an up-front tax on such vehicles to compensate for differential fuel pricing.

Parikh said, "If you are putting a heavy tax on petrol because it is for luxury consumption and if you don't want to put a similar tax on diesel, then obviously we have to put the same kind of tax on diesel vehicles like SUVs and others."

The committee says the measures will help 10 per cent reduction in fuel consumption along with improvement in air quality, road safety, better mobility and energy security.

However, the panel was apparently far from unanimous on this measure, and Planning Commission deputy chairman Montek Singh Ahluwalia himself seemed less than enthusiastic about it.

"Some of the members felt such an upfront tax would be unfair to the manufacturers as upfront costs are important determinant in vehicle choice," said the report submitted to the Planning Commission.