Kirit Parikh Panel: Levy additional excise duty of Rs 80,000 on diesel cars

Feb 3: The Kirit Parikh Committee has also recommended a tax on diesel cars to compensate for the higher excise duty on petrol compared to diesel that encourages the use of diesel cars. The following arguments were used:

•  Petrol and diesel used in cars, including SUVs, are for final consumption. The higher excise duty on petrol compared to diesel encourages use of diesel cars. While greater fuel efficiency of a diesel vehicle should not be penalized, a way needs to be found to collect the same level of tax that petrol car users pay from those who use a diesel vehicle for passenger transport. 
• An additional excise duty on a diesel vehicle corresponding to the differential tax on the petrol should be levied. 
• At the present excise rates, the additional excise duty paid by a petrol vehicle owner who on an average drives 8000KM/year and gets an average mileage of 13.5 KM/litre is around Rs.10000 per year. The present discounted value at 10% discount rate over the 10-year life of a vehicle would be around Rs. 67,500, and at 5% discount rate it would be Rs. 81,000.
• An appropriate discount rate would be the rate on government bonds. At the present rates and a discount rate of 5 per cent, an additional excise duty of Rs. 80,000 should be levied on diesel driven vehicles. 
• Some persons may still opt for a diesel vehicle if they expect to drive much more than an average petrol vehicle owner does. That should not be discouraged.

Source: www.indianpetro.com

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