Centre for Science and Environment (CSE) said that though diesel price deregulation and lowering of price differential between petrol and diesel has made a dent in the rate of increase in 'dieselisation' of car segment, low tax diesel continues to lure customers.
Dieselisation is a term used for the increasingly common use of diesel fuel in vehicles.
Clean diesel fuel - containing 97 per cent less sulphur - is more efficient and reduces emission.
"CSE demands additional tax measures to control dieselization and create clean fuel fund to introduce clean diesel quickly to cut public health risks," it said in a statement.
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Referring to the air quality data from Central Pollution Control Board (CPCB) which said that diesel emissions related pollutants were a serious concern in Indian cities, the CSE said that while in 2009 about 102 cities monitored exceeded the standard for PM10, in 2012 this has increased to 137.
"India cannot afford to dieselise at the current level of fuel and technologies. Cheap diesel creates incentive for more driving and for bigger cars. His results in more fuel use, more toxic pollution per km, more warming per litre of carbon rich diesel burnt and more warming due to its heat absorbing black carbon emissions," it said.
"As of today there is no legal mandate for the automobile industry and the refineries to meet more improved emissions standards in a time bound manner," it said.