Prior to the Indian government decision on reducing petrol/diesel prices, it reduced CENVAT by 4% giving ease to vehicle manufacturers so that they could deal better with the prospects & market. Appreciating the decrease in tax, vehicle giants started offering discounts up to Rs.55, 000/- in order to keep their market alive. Now another thing which is supposed to give them an extra boost in the effort is going to be the reduced fuel prices (Rs.5/- on petrol & Rs.2/- on diesel). The automotive manufacturers are expecting buyers to come upfront & buy out vehicles this season.
But seeking the slow down of market, new buyers seems to be hiding in den stiffening their pockets for few more days. Even people who had collected some bucks for their dream car have not been willing to spend as every commodity is going through inflation. Recently, there was news that three topmost auto giants General Motors, Ford and Chrysler of US have recently made a desperate appeal to the Congress for a $25 billion (Rs 1,25,000 crore) bailout in order to avert an imminent collapse. Now, we have to imagine that if such an economy is collapsing & so are the businesses, how Indian automotive is going to get through this rough patch. How far this reduced fuel price will help in slowing down inflation?
Though, a cut in diesel prices is expected to lessen prices of fruits, vegetables, food grain and industrial products. A large proportion of agricultural and industrial goods are transported by trucks & railways. A 6% drop in diesel prices will allow operators lower costs across the chain.