The auto industry, however, said any such step to impose additional taxes on the sector will not "make sense".
Parikh, who was roped in by the government to check the mounting fuel subsidy burden, said diesel prices should be made market-driven after fixing the subsidy cap at Rs 9 per litre.
A former Planning Commission member Parikh now heads the think-tank Integrated Research and Action for Development.
"Instead of looking at a one-time diesel tax on new purchases, the alternative could be to abolish the existing one-time road tax and make it annual and apply a differential between petrol and diesel vehicles," Parikh told reporters here on the sidelines of a SIAM event.
Asked what could be the difference on road taxes between diesel and petrol-driven vehicles, he said: "For normal cars, it can be higher by between Rs 10,000 and Rs 20,000 for diesel version and for the sports utility vehicles (SUVs), it should be higher by up to Rs 50,000."
Parikh said the proposal has been submitted to the Finance Ministry.
Reacting to the development, Society of Indian Automobile Manufacturers (SIAM) Vice-President Vikram Kirloskar, who is also the Vice- Chairman of Toyota Kirloskar Motor, said: "Today, 45 per cent of selling price of a vehicle is tax and any additional tax does not make sense."
Calling for deregulation of diesel, he said: "We don't want diesel vehicles to be over-taxed. We would rather have market pricing of diesel."
Dear Mr. Vikram Kirloskar, Increased annual tax on SUV's makes perfect sense to the aam aadmi who walks on the footpaths unlike people like you who hop into expensive cars the moment you are out of your palaces. You and your sons probably own half a dozen of these SUVs and hence the tax appears senseless to you. In fact the government should make the SUV and other private luxury car owners pay the entire cost of public transport which should be made free in our country. The aam aadmi is utterly fed up with the utter greed, selfishness and shamelessness of the rich ones like you who dictate policy in our country.
True to the Nehru-Gandhi tradition, another idiotic idea which will find acceptance in the political class. Rather than reduce the need to transport goods over large distances and remove middlemen which are the reason why fuel costs are linked to inflation, another pseudo economist tries to flex his brain and finds a way to fill govt. coffers so that more scams can be funded.
This proposal was given by self to none other than Mr Parikh 2 years Back. (I have e-mail communications with him on the matter). This is one of the most innovative method to address complex Diesel subsidy in India.
Averaging like this makes me think this guy is more a politician than a problem-solver. Instead, they should make the people entitled to subsidies have a legit ration card for their diesel purchases. Put the burden of proof on the one who receives the subsidy, not the one who creatively exploits the loophole created by the government! This may also curb the negligent use of fuel.