Shares of diesel vehicle makers took a nose dive on Thursday in the wake

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of a recommendation by a government-appointed panel to levy an additional excise duty of Rs 80,000 on diesel vehicles.

Tata Motors fell 4.4 per cent to Rs 689.60 while Mahindra declined 3.5 per cent to Rs 1,017 and Maruti Suzuki fell 1.24 per cent to Rs 1,364.95

If the recommendation by the committee headed by Kirit S. Parikh is accepted by the government, it will increase the price of diesel vehicles.

“It does not make sense to me to charge the same excise on a Rs 4 lakh diesel compact car and a Rs 25 lakh diesel SUV,” chairman of Maruti Suzuki India RC Bhargava told Financial Chronicle.

He said if the recommendation is accepted, it would hurt the auto industry.

The Parikh panel report on pricing of petroleum products was submitted to the government on Wednesday, with the petroleum minister saying the report would be sent to the cabinet for approval within 7-10 days.

The panel said in the report that that higher excise duty on petrol vehicles compared to diesel encouraged use of diesel cars.

“A way needs to be found to collect the same level of tax that petrol car users pay from those who use a diesel vehicle for passenger transport,” it said.

In India, a fifth of the passenger cars and 95 per cent of multi-purpose utility vehicles are run on diesel.

The maximum impact of the change in excise duty may be on Mahindra, which sells diesel versions for all its vehicles except Logan, its only passenger car model. But the company’s chief of operations of automotive sector Rajesh Jejurikar said he could respond as he had not read the Parikh report.

“Diesel vehicles use a heavier engine, which is more costly to produce. That’s why diesel cars are priced 15-20 per cent more than petrol cars. If you charge another Rs 80,000 to a diesel vehicle owner, it becomes unviable,” chief general manager marketing of Maruti Suzuki India Shashank Srivastava said adding the government should rather focus on reducing emissions in diesel vehicles.

“If the recommendation is accepted for only passenger vehicles, there will be more of an impact on Mahindra & Mahindra. And if it is passed for commercial vehicles then Tata Motors will bear a larger impact,” senior research analyst at Angel Broking Vaishali Jajoo said.

It would have an impact on the economy since transportation industry formed a big part of the GDP, Jajoo said.

But Tata Motors said they had no comment to make at this stage. "We do not have any guidance on this issue," head of corporate communications Debasis Ray said.

(With inputs from Rupesh Janve in Mumbai)