Finance Ministry considers proposal to increase excise tax on diesel cars

India’s Finance Ministry announced that it is looking into a proposal to increase the tax on diesel cars running on subsidized fuels.  Currently, there is a growing differential between the prices for diesel fuel and petrol.  The ministry is looking at a variety of issues before making its decision.  One issue is whether to use the revenue from the tax to subsidize oil marketing companies who are being impacted by rising crude oil prices.  Another issue is under what type of governmental order the excise tax can be raised. One option would be to use the emergency powers available under the Central Excise Tariff Act.  Another option would be a levy surcharge.  Currently, the government levies an excise duty of 10% on small cars and 22% plus Rs 15,000 (US$335) on larger vehicles.  The price differential between petrol, which is currently Rs 63.37 per liter (US$1.41), and diesel fuel, at Rs 37.75 (US$0.84), is considerable.  (June 2, 2011)