A day after the government ruled out any decontrol of diesel prices, the country’s largest carmaker Maruti Suzuki India (MSI) said it will invest Rs 1,700 crore to set a diesel engine plant with a total annual production capacity of 3 lakh units, at its Gurgaon facility by 2014.
The announcement came after the company’s board of directors approved the plan earlier in the day.
On Friday, petroleum minister Jaipal Reddy had ruled out decontrol of diesel prices. Earlier in the Budget the government did not levy any additional excise duty on the diesel vehicles which has also led the manufacturers to go ahead with their plans.
Prior to the Budget, manufacturers like Maruti and Hyundai had put on hold their diesel unit plans because of lack of clarity on diesel pricing. A government-appointed committee had suggested levying additional duties on diesel vehicles to check surging sales of such vehicles on the back of lower prices of the fuel compared to petrol.
The idea was that subsidised diesel does not fuel passenger vehicles, which are not used by the poor sections of the society.
Diesel vehicles cost more than their petrol variants. Further, the companies feared that if the government decontrolled diesel prices the incentive to buy such vehicles would go away and therefore had put on hold such plans. However, now such apprehensions have been cleared. “We are going to invest Rs 1,700 crore to set up the diesel plant, which will be constructed inside our Gurgaon manufacturing facility. This will be a brand new unit and will be owned by the company,” Maruti chairman RC Bhargava said after the company’s board meeting.
The company will build the plant in phases and will start operations by mid-2013 with an initial capacity of 1.5 lakh units a year, he added.
“In the first phase, we will invest Rs 950 crore. After that, we will double the capacity to 3 lakh units per year by 2014 and it will entail a total investment of Rs 1,700 crore,” Bhargava said.