Although the monthly 50 paise increment in diesel prices has managed to bring down under-recovery of oil marketing companies to some extent, it has impacted the auto industry negatively as far as sales of diesel vehicles are concerned.
In May last year, the difference between petrol and diesel rates was as high as Rs 33 with the latter commodity available at Rs 46 a litre. This led to boost in sales of diesel vehicles. But with continuous hike in diesel prices, the difference between the two has come down to Rs 14 which has effectively chased away buyers of diesel cars.
Mahindra and Mahindra (M&M) is one such industry player struggling to sell diesel vehicles. Speaking to CNBC-TV18, Pravin Shah of M&M admitted the industry was seeing de-growth in SUV sales on higher diesel prices. The excise duty of 3 percent levied on the SUVs by Finance Minister also impacted sales to certain extent. With the difference in petrol and diesel prices getting narrowed, sales of diesel vehicles will take a beating in the coming future.