Heavy Industries and Public Enterprises Minister Praful Patel has written to Finance Minister Pranab Mukherjee urging him not to impose higher excise duty on diesel cars.
While seeking to dispel concerns raised regarding the environmental impact of diesel vehicles, Patel also sought removal of the additional duty of Rs 15,000 imposed on big cars.
"I would request you not to consider the proposal, if any, for imposition of higher excise duty on diesel cars," he said in the letter.
Citing examples of the EU, the US and Japan, which are encouraging diesel vehicles for reducing the overall fuel consumption levels, he said world over, diesel technology has been recognised as an important option for meeting the stringent fuel efficiency regulations.
Patel further said India is also developing fuel efficiency regulations for passenger cars which seek to significantly improve the fuel efficiency of vehicles.
"India being predominantly a small car market, use of efficient diesel technologies is an important strategy for achieving the ambitious fuel efficiency norms," he added.
In the past, Rural Development Minister Jairam Ramesh during his stint as Environment Minister had hit out at diesel vehicles, specially 'fuel guzzling' SUVs, saying the owners of such vehicles should be made to pay the market price of the fuel and not at subsidised rates.
It had prompted calls from various quarters for imposition of higher taxes on diesel vehicles as their demand also soared with repeated hikes in petrol price, leading to a huge gap with that of diesel.
Referring to industry estimates, Patel said: "The assumption that 15 per cent of diesel is being used by car owners is not correct and this is actually significantly lower".
Diesel vehicles being more expensive already attract a much higher level of excise duty in absolute terms, he said.
"However, the continued demand for diesel vehicles is mainly on account of their lower operating costs, which is also due to inherent 20-25 per cent higher fuel efficiency of diesel vehicles," Patel said in the letter.
He also supported phasing out subsidy on diesel, like petrol, and link it to the market price as recommended by Dr Kirti Parikh's report.
"In which case the subsidy for use of diesel in mass/public transportation, agriculture etc can perhaps be extended on targeted basis with much better outcomes than presently achieved. This would be the better and logical approach to the issue," he added.