Shares of auto majors such as Maruti, Tata Motors and Mahindra & Mahindra lost ground on Thursday amid reports that the government was
moving in direction of taking measures that might make diesel
expensive for car owners.
CHECK OUT: Top eco-friendly cars in the market Maruti shares dropped 1.2 per cent to close at Rs 1,200.75 and Tata Motors fell 1.5 per cent to Rs 913.35 on the Bombay Stock Exchange (BSE).
The losses were much sharper for Mahindra & Mahindra, whose stock fell 4.5 per cent to close at Rs 679.25.
Should diesel prices be deregulated? Shares of tobacco companies also fell amid reports that the government might consider a possible hike in excise duty on tobacco products as part of efforts to increase its revenue collection.
This led to shares of ITC falling by 3.2 per cent to Rs 200, while Godfrey Phillips India slumped 2.2 per cent to Rs 3,160 and VST Industries fell 2.2 per cent to Rs 1,136.65.
PM's economic advisor backs diesel price deregulation Auto shares fell after the government indicated that it might do away with the subsidy given on diesel used by passenger cars - a move that could make diesel expensive for car owners.
"...We can accept your (Opposition) suggestion and try to work out what mechanism could be found out so that this section (diesel car owners) are not subsidised," Finance Minister Pranab Mukherjee said replying to a debate on price rise in the Lok Sabha.
The subsidised diesel is the preferred fuel for the transport sector (both trucks and passenger buses) and is also used in irrigation pumps and other agriculture equipments.
Luxury cars and SUVs too run on diesel and so do power generators at malls and telecom towers.
Later speaking to reporters outside the Parliament, Mukherjee that the government is moving in the direction of decontrol of diesel price and has in principle taken a view on decontrol of prices, as has been done in case of petrol.
PERSPECTIVE: Petrol v/s Diesel car: The rich win Oil Minister S Jaipal Reddy also hinted that the government was mulling dual pricing of diesel wherein the luxury car owners may have to pay market rate and the sale of subsidised fuel would be restricted only to farmers and transport trucks.
"These are all proposals which are being considered by the Finance Ministry," Reddy told reporters when asked if the government was considering dual pricing of diesel.
Diesel is the most consumed fuel in the country but is sold at a discount to the cost of production. Diesel subsidy currently is Rs 6.82 per litre and on an annualised basis it would amount to Rs 52,365 crore out of the total fuel subsidy estimated at Rs 114,336 crore in the current financial year.
Special 
