The Finance Ministry is examining a proposal to hike excise duty on diesel cars, a move which may discourage consumption of subsidised fuel by personal vehicle owners, a senior government official said today.

"The proposal is there and that is being examined by Finance Minister (Pranab Mukherjee). Consultations are being held and appropriated decision will be taken by the government in due course," Central Board of Excise and Customs (CBEC) Chairman S K Goel told reporters here.

Excise duty on petrol cars with engine capacity under 1,200 cc and diesel cars with engine capacity under 1,500 cc is 12%. The duty on such cars with length exceeding four metres is 24%.

Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively attract an ad valorem duty of 27% and a fixed duty of Rs 15,000.

In its Budget proposal to the Finance Ministry, the Petroleum and Natural Gas Ministry had pitched for levying additional excise duty on diesel cars in order to discourage consumption of subsidised diesel by personal vehicle owners.

Diesel is the most consumed fuel in the country but is sold at a discount to its imported cost. Luxury cars and SUVs also run on diesel and so do power generators at malls and telecom towers.
It has long been argued that the rich should not get subsidised fuel. According to Oil Ministry estimates, 15% of diesel consumption is accounted for by personal cars and SUVs.