Nitin Gadkari Says 'No Active Proposal' After Seeking Additional 10% GST On Diesel Engines

Gadkari said such a move will fast-track switch to cleaner transport.

<div class="paragraphs"><p>Union Minister Nitin Gadkari.</p></div>
Union Minister Nitin Gadkari.

The transport ministry will suggest additional 10% pollution tax on diesel vehicles and generators, Nitin Gadkari said, dragging down shares of automakers. He, however, later clarified there is "no such active proposal".

"I will request the finance minister to levy 10% additional GST on diesel vehicles and gensets," Gadkari, minister of road transport and highways, said at the 63rd annual convention of the Society of Indian Automobile Manufacturers. "We'll increase the tax so much that it will become hard to sell such vehicles."

The auto industry is gradually moving away from diesel with just 18% of the passenger vehicles supporting the fuel, down from 43% in 2014, Gadkari said. However, diesel continues to be the preferred fuel in the commercial vehicle industry.

Highlighting the problem of air pollution, Gadkari urged the auto industry to move forward with time as customers are ready to pay more for better services.

Gadkari later clarified on social media platform X (formerly Twitter) that "there is no such proposal active considerations 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," he said. "These fuels should be import substitutes, cost-effective, indigenous, and pollution-free."

Shares of automakers dropped after Gadkari's comment, with the Nifty Auto Index trading nearly 2.4% lower at 12:56 p.m. compared with a 0.22% decline in Nifty 50 in a volatile session.

The declines were led by Mahindra and Mahindra Ltd.'s 3.95% fall, followed by Ashok Leyland Ltd. that was trading 3.54% lower. Auto ancillary companies including Samvardhana Motherson International Ltd., Sona BLW Precision Forgings Ltd. and Bharat Forge Ltd. were trading more than 3% lower compared with a 0.2% decline in Nifty 50.