What do you think is the lesser of the two evils, a special tax on diesel powered passenger vehicles or an increase in diesel prices? If you think it is the latter, well, the entire auto industry seems to be in total agreement with you. As per reports, manufacturers of diesel run vehicles have welcomed the Government's decision to allow oil marketing companies to raise diesel prices. This could well be a negative for cars run on diesel. However, the overall auto demand in the country is unlikely to get affected. Simply because buyers could start moving back to petrol. And with most manufacturers in the country having both petrol as well as diesel capacities, they would continue to benefit from India's car growth.

A special tax on diesel run cars however would further increase the price gap between petrol and diesel cars. And this poses great risk to the huge investments that diesel manufacturers have made in diesel engine capacities. Not to forget the uncertainty it puts in mind of auto companies keen to set up capacities in the country.