"Though the proposed price hike of diesel is quite steep but SIAM would really support the rationalising of price hike," Society of Indian Automobile Manufacturers (SIAM) said in a statement.
It, however, insisted that the rationalisation process has to be done in a manner that should not affect consumers adversely.
"It may affect the sales of vehicles for a short term but the elimination of price distortion will help the industry and economy in the long run," SIAM said.
According to Oil Ministry sources, price hike of diesel is being considered as the government scrambles to find ways to meet an unprecedented Rs 160,000 crore deficit expected this fiscal on selling diesel, cooking gas (LPG) and kerosene below their production cost.
Diesel prices may be hiked by Rs 10 per litre over a 10- month period and kerosene rates increased by same quantum over the next two years if a proposal being mulled in the Oil Ministry is accepted.
Price of diesel, which currently costs Rs 47.15 per litre in Delhi, was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. Kerosene rates have not changed since June last year and it at present costs Rs 14.79 per litre in Delhi.