The government is mulling imposition of 10% tax on diesel vehicles and components across all segments, according to the union minister Nitin Gadkari. Gadkari was speaking at the sidelines of 63rd SIAM (Society of Indian Automobile Manufacturers) annual convention.

"In the evening, I will be handing over a letter to union finance minister Nirmala Sitharaman with suggestions regarding imposition of 10% tax on diesel vehicles," Gadkari says.

However Gadkari clarified in a tweet saying, "There is an urgent need to clarify media reports suggesting an additional 10% GST on the sale of diesel vehicles. It is essential to clarify that there is no such proposal currently under active consideration by the government.In line with our commitments to achieve Carbon Net Zero by 2070 and to reduce air pollution levels caused by hazardous fuels like diesel, as well as the rapid growth in automobile sales, it is imperative to actively embrace cleaner and greener alternative fuels. These fuels should be import substitutes, cost-effective, indigenous, and pollution-free," he adds.

Following the announcement, the share price of Mahindra & Mahindra and Tata Motors dropped 4% and 3%, respectively. At 1:51 pm, shares of Mahindra & Mahindra was trading 2.34% lower at ₹1,545.05, whereas the share price of Tata Motors was trading 2.07% lower at ₹621.55. Meanwhile, shares of Maruti Suzuki, which stopped manufacturing diesel vehicles two years back, remained unaffected.

According to Gadkari, India is currently importing 89% of fossil fuels which is an economic challenge. "Hence, bio-fuel or alternate fuel will be the future," says Gadkari.

The country is aiming to become the largest automobile industry by FY2027, says Gadkari. "At present, India is the largest manufacturer of three-wheelers, and second-largest manufacturer of two-wheelers. India is the sixth largest manufacturer of commercial vehicles and second-largest manufacturer of passenger vehicles," says Gadkari.

In 2022-23, the country sold the highest-ever 39 lakh passenger vehicles, according to Gadkari. The country sold 9.62 lakh units of commercial vehicles by 2022-23. "The country will benefit simultaneously, in terms of export of commercial vehicles," says Gadkari.

In terms of two-wheelers, Gadkari says that India currently exports 52% two-wheelers globally. "India has 400 startups catering to the manufacturing of two-wheelers. Owing to the increase in demand these start-ups have kept lithium-ion battery for 60 km of range."

According to Gadkari, in order to become a leader in automobile industry, the country has to reduce logistics cost. At present, India has a logistics cost of 14-16%. In china the logistics cost is 10% and the US and other European countries have 12% logistics cost.

"I assure that logistics cost for automobiles will come down to 9% in the next three years. This will aid automobile exports from the country," says Gadkari.

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