As soon as Gadkari made the statement, Mahindra shares fell around 4% on BSE. It recovered after its clearing and closed the day with a loss of 2% at Rs 1,553. Shares of Tata Motors also fell a little less than 4% but later recovered to close the day at Rs 621 after falling 2.2%.
“Pollution is a serious problem, and we also import the fuel. I will ask the Minister of Finance to add another 10% to that VAT on diesel engines… Reduce diesel production or I will increase taxes,” the minister told a room full of industry representatives as companies such as Tata Motors, Mahindra & Mahindra, Hyundai, Kia, Toyota and Mercedes-Benz were left shocked.
The minister – who asked the industry to opt for relatively cleaner products such as electricity, flex fuel and CNG vehicles – did not stop bashing diesels as he continued to address the industry at the annual convention of industry body Siam. “By any means necessary, say goodbye to diesel. If not, we will increase taxes so much that it will be difficult for you to sell.”
Before the industry could digest the statement as the minister left the room, Gadkari made a U-turn, and that too within half an hour. “There is an urgent need to clarify media reports suggesting that a further 10% VAT should be levied on the sale of diesel vehicles. It is essential to clarify that such a proposal is not currently being actively considered by the government,” he said via his post on X (formerly Twitter).
However, the minister added in his statement that the industry should look at “greener alternative fuels” to curb the menace of pollution. “In line with our commitments to achieve Carbon Net Zero by 2070 and reduce air pollution levels caused by hazardous fuels such as diesel and the rapid growth of car sales, it is imperative to embrace cleaner and greener alternative fuels. These fuels must be import substitutes, cost-effective, indigenous and pollution-free.”
The share of diesel cars has fallen due to various restrictions imposed on the fuel by various governments, including in the Delhi-NCR region, where they have a lifespan of 10 years, compared to 15 years in other places.
However, the minister’s statement threw the industry into turmoil as companies said any additional tax on any fuel type would slow down the industry. “We are already one of the most taxed sectors and diesel SUVs are currently taxed at around 45%, which is extremely high. How can the minister even talk about taxing us more when we are adhering to all the laws laid down for the industry,” said a CEO of a leading auto company, requesting anonymity.
Another official said it is “wrong to demonize diesels,” especially as they meet all emission standards set by the government. “We have spent millions of rupees on upgrading our diesel engines to BS6 and subsequent norms. How can the government talk about imposing more duties on us even if the fuel meets stringent emission norms? What will happen to our investments? “
