The import duty on components has been hiked to 30 per cent but its effect may be marginal in comparison. Multi-utility vehicles (MUVs), a segment comprising the Tata Sumo and Safari and Mahindra & Mahindra's Armada, will be more expensive by at least Rs 8,000 each.

While sales of MUVs may not suffer, especially when they require a cheap fuel like diesel, this may hold good for petrol-driven cars, especially in the mid-size segment. As it is, sales in this category have been nothing to write home about and it is only the Esteem and the recently introduced Honda City that have been doing reasonably well.

The recent price cuts of Cielo have boosted sales but now with the increase in petrol prices, it remains to be seen ifthe good showing continues. The Ford Escort and Opel Astra have been slipping alarmingly and it would help if the former introduced some attractive price schemes for its diesel version. General Motors India would do well to introduce the diesel Astra soon but, again, the price tag of close to Rs 10 lakh may not really do the trick.

The immediate winners, experts reckon, will be the recently introduced diesel versions of the Uno and Zen. Customers may now be inclined to shift priorities from a mid-size petrol vehicle to a small diesel version. Hence, it is more than likely that interested buyers of the Cielo or Astra could now think of other alternatives like the diesel version of the Escort, which would be more expensive, or the diesel Zen and Uno which could actually work out to be cheaper.

"This is going to be awful in the long run," say sources in the automobile industry. According to them, this would in one go ensure that the petrol verisons of the Escort and Astra will brake to a standtill, or worse,see alarming slide in sales. The Honda City has had a good run but what if the petrol factor goes against it. This could be the extreme grim scenario considering that there are petrol loyalists who would not mind paying more so long as they have faith in the brand of the vehicle.

What has been particularly strange is the government's attitude to the MUV segment. The first time around, in 1994, there was a clause that stipulated a gross weight of 2,700 kg to qualify for a concessional 15 per cent excise duty. Thereafter, the uniform 20 per cent was introduced, followed by 25 per cent last year and now 30 per cent. Effectively, the excise duty level today is at par with cars which makes one wonder if Maruti's effort to go in for an eight seater Gypsy to qualify for a concessional excise duty was worth its while.