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The country's largest car maker Maruti Udyog is getting aggressive about its diesel project now. The company is learnt to be in negotiations with Peugeot of France to set up a dedicated facility to manufacture diesel engines for passenger cars and sports utility vehicles.

Maruti officials, however, refused to confirm or deny the move. "We have already announced plans to set up a diesel engine facility and various options are being considered,"

Peugeot already supplies diesel engines to Maruti for the Zen and Esteem models. However, shortage of Peugeot engines have affected sales of the Zen diesel in the past. Suzuki officials have, meanwhile, said they want Maruti to have its own capability for the production of diesel engines.

Sources, however, say that the two companies have already held initial round of discussions and another round of negotiations is planned for later this month. In the meantime, Maruti engineers are learnt to have visited various engine component manufacturers in India to check their readiness to meet the requirement of the proposed unit. "We had an initial round of negotiations with Maruti. However, nothing definite has been indicated by them so far," said a senior official of a leading engine component maker.

Though details of the project can't be confirmed, the unit is most likely to be set up as a joint venture with French vehicle maker. The proposed unit is learnt to have the blessings of Maruti's parent, Suzuki Motors of Japan, as well. It will not only meet Maruti's requirement but will also service other vehicles manufacturers in India and exports.

"The project would be similar to what Hindustan Motors is trying to do," says a source close to the development. Hindustan Motors' has emerged as one of the largest suppliers of engines and power trains in India and its client list includes Ford Motors and General Motors India (GMI).

At present, diesel-powered vehicles account for just 5% of Maruti vehicles sold in India against the industry average of 15%. The company plans to narrow this gap.

Peugeot, part of PSA Peugeot Citron group, is one of the world's largest manufacturers of diesel engines. During '03, 65% of Peugeot and Citron models sold in France were equipped with diesel engines.

PSA Peugeot Citron is the second largest carmaker in Europe with 2.46m vehicles sold in '03. It ranks first in France , its home market, with 33.9% share of the combined passenger car and light commercial vehicle market in '03.

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