The government's revenue earnings from Re1 per litre hike shall be three times more as compared to Rs2,500 crore revenue from the levy of 5% vehicle tax on diesel cars, said the carmaker

Ahmedabad: Terming the proposal to levy vehicle tax on diesel cars as a regressive step for industry, General Motors (GM) on Monday said that industry body Society of Indian Automobile Manufacturers (SIAM) and company has recommended Re1 per litre hike in diesel prices to the Government, with a view to end market distortion, reports PTI.

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

The petrol prices had touched Rs78 per litre level in the recent past, while diesel prices have remained stable at over Rs40-Rs45 per litre or so.

"We as well as SIAM has recommended, a hike in diesel prices by Re1 per litre as it would help government earn Rs6,000 crore revenue," P Balendran, vice president for corporate communication at GM told newspersons.

"The government's revenue earnings from Re1 per litre hike shall be three times more as compared to Rs2,500 crore revenue from the levy of 5% vehicle tax on diesel cars," he said.

The recommendation by GM and SIAM comes in wake of a Union Planning Commission's study.

"The Planning Commission has conducted a study and the report has come out saying that privately owned passenger cars consume only 1.03% 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.

"All original equipment manufacturers (OEM's) have recommended that right approach will be to increase the diesel prices in small doses and bring down the petrol prices in small doses, so that market distortion is addressed and the sector performs well," he said.

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 6-8% 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, of 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 Taveras this month, amongst its fastest selling models in India having a waiting period of up to three months.

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

Within next one month time Taveras production shall reach from 1,800 to 2,500. It's localisation is 100%, 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.