* Feared diesel tax not included in budget
* Tata Motors stock hits lifetime high
* Govt announces tax increase on imported cars
* Generous diesel subsidies to stay
By Henry Foy
MUMBAI, March 15 Indian car makers heaved
a sigh of relief and saw their shares soar after the federal
budget did not hike taxes on diesel cars, in a boost for
diesel-focused manufacturers such as Mahindra and Mahindra
and Tata Motors.
Carmakers in India had feared a tax on diesel vehicles or a
reduction in the fuel's generous subsidy , which has
boosted sales as overall demand slows on high interest rates and
rising petrol prices in Asia's third-largest economy.
"This budget was very, very good for the auto industry,"
said Vineet Hetamasaria, auto analyst at PINC Research in
Mumbai. "Everyone was expecting taxes, and they didn't come."
Shares in Tata Motors jumped as much as 2.6 percent to their
highest-ever price after Finance Minister Pranab Mukherjee's
budget speech in parliament on Friday.
Market leader Maruti Suzuki's stock rose as much
as 4.6 percent to its highest level since January 2011.
Mukherjee also announced a hike in import duty to 75 percent
from 60 percent for assembled SUVs and multi-utility cars
costing more than $40,000. An announced increase in excise tax
for cars made in India to 27 percent would only have a small
impact on car costs, analysts said.
Shares in Mahindra & Mahindra, India's leading SUV
manufacturer, whose entire model range runs on diesel, rose as
much as 6.1 percent.
Diesel car sales have accelerated to account for about 40
percent of new purchases in India, compared with less than 20
percent a few years ago. The diesel model of Maruti Suzuki's
popular new Swift hatchback has a waiting list longer than six
A rush to buy vehicles before the budget drove car sales in
February to their highest-ever total.
Cutting the subsidy, which makes the fuel about 50 percent
cheaper than petrol, is a political hot potato due to diesel's
extensive use in India's vast agricultural industry.
Fuel retailers and environmental groups had
instead called for an extra excise duty of 81,000 rupees on
diesel cars, asserting that they account for 15 percent of the
fuel's consumption. Industry groups say the amount is less than
Clarity in the government's stance on the fuel should
kickstart investment plans by India's car makers, who were
unwilling to splurge on new plants to meet the surging demand
until the ambiguity over diesel was resolved.
Overall car sales in India will likely only post marginal
growth in the fiscal year that ends this month, but are expected
to grow by more than 10 percent in the coming fiscal year,
driven by increased salaries and a rapidly growing middle class.
(Editing by Aradhana Aravindan)