India minister to propose higher diesel vehicle tax, warns automakers

India's road transport minister, Nitin Gadkari, on Tuesday said he will propose an additional 10% tax on diesel vehicles and warned automakers of even higher levies to cripple their ability to sell such high-polluting vehicles.

Gadkari made the comments at a New Delhi automakers conference where executives of Tata Motors, Mahindra and Mahindra, Maruti Suzuki and foreign car companies such as Mercedes and Volkswagen were gathered.

Gadkari said he will later in the day ask the finance minister for an "additional 10%" goods and services tax on diesel vehicles to tackle problems related to pollution.

"Say bye to diesel soon, otherwise we will increase so much tax that it will become difficult for you to sell these vehicles... we have to leave petrol and diesel soon and walk on the new path of being pollution free," Gadkari told the audience.

"People are not in the mood to listen to me soon. There should be a diversification (by companies) as soon as possible."

The number of diesel vehicles in the world's third-largest car market has fallen to 18% from 50% a decade ago, Gadkari said, but warned that just like India pushed through stricter fuel emission norms in the face of opposition from the industry, it will similarly drive up taxes to push out diesel vehicles.

The Indian government currently imposes a 28% tax on diesel cars and an additional so-called "cess" is levied depending on the vehicles' engine capacity.

The finance ministry did not immediately respond to a request for comment.

Shares in Indian automakers Tata Motors, Mahindra and Mahindra, Ashok Leyland, and Eicher Motors fell between 1.5% and 4.5%.