Automobile industry body SIAM today asked the government to consider hiking price of diesel to bring parity with petrol as strong reactions continued to pour in against the Rs 7.50 per litre rise in petrol prices.
"SIAM requests the government to reconsider its proposal for such a steep increase in the price of petrol and to seriously consider the option of a moderate increase in the price of diesel before it impacts the growth of the industry," Society of Indian Automobile Manufacturers (SIAM) said.
In a statement, SIAM said there is a need to look at the petroleum product pricing policy in a comprehensive manner and remove the distortions so that downstream products market also do not get distorted.
The industry bodies said due to a big difference in price of petrol and diesel, demand for petrol-driven cars have gone down while that of diesel ones have increased.
"This is leading to a long chain of distortions, which will lead to sub-optimal use of resources (meant for petrol vehicles) unless appropriate market oriented policies are put in place," it added.
"The need of the hour is to bite the bullet by reducing the price hike on petrol and revising the price of diesel, which will bring in more revenue to government as well as some level of parity between the two competing fuels for automotive industry," SIAM said.
The petrol price hike will hurt customers, who are mainly middle class two-wheeler and the small car owners, it said.
Passenger car sales in India witnessed the slowest growth during April in 10 years at 3.4 per cent as customer sentiment remained low due to post-Budget price hikes and high interest rates, affecting the entry-level segment most.
As per SIAM figures, domestic passenger car sales stood at 1,68,351 units in April 2012 compared to 1,62,813 units in the same month last year.
In the fiscal 2011-12, car sales in India grew by just 2.19 per cent which was the slowest since 2008-09.