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Clarity Prevails: No Additional Tax on Diesel Vehicles

December 07, 2023 | 1 min read | Industry News

In a reassuring statement, Minister of Road, Transport, and Highways, Nitin Gadkari, affirmed in Parliament that the government is not contemplating an additional 10 percent tax on vehicles powered by diesel engines. Responding to queries on the possibility of extra taxes on diesel vehicles and any government directive to shift away from diesel, the Minister emphasized that no such proposals are under consideration by the ministry.

This clarification comes after an announcement made by Gadkari in September during the annual conference of the Society of Indian Automobile Manufacturers. At that time, he had cautioned both domestic and foreign automakers about the potential imposition of an extra tax if they did not transition to eco-friendly fuels. However, on the same day, Gadkari clarified that no active proposal for such a tax was currently on the table.

Reiterating the commitment to achieving Carbon Net Zero by 2070 and addressing air pollution concerns caused by diesel, Gadkari emphasised the need for embracing cleaner and greener alternative fuels. These alternatives should be import substitutes, cost-effective, indigenous and pollution-free, aligning with the government's vision.

While earlier comments on the possible 10% tax had sparked concerns within the automotive industry and the public, his recent clarification provides relief. India, as the world's third-largest automotive market, witnesses significant sales of vehicles powered by diesel engines. Despite a reduction in the share of diesel cars in the passenger vehicle segment, diesel variants continue to contribute significantly to commercial vehicle sales.

Diesel constitutes about 40% of India's overall refined fuel consumption, with nearly 80% of the diesel used in the country dedicated to the transport sector. Earlier in the year, a panel formed by the Ministry of Petroleum and Natural Gas recommended a ban on the sale of diesel-powered four-wheel vehicles in cities with populations exceeding one million, starting from 2027.

In the evolving landscape of India's automotive policies, Gadkari's recent clarification brings transparency and alleviates concerns, providing stakeholders with a clearer understanding of the government's stance on diesel vehicles.

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