NEW DELHI--Maruti Suzuki India Ltd. is considering raising its diesel engine production capacity beyond an already announced plan to nearly double output, in an effort to stay ahead of the curve as demand continues to veer toward cars which run on the fuel.

"We should have a total capacity of 700,000 diesel engines by 2014. We are examining if this needs to be ramped up further," Maruti Chairman R.C. Bhargava said at the company's annual meeting of shareholders Tuesday.

Maruti, India's biggest car maker by sales, now has the capacity to make 300,000 diesel engines a year, and it buys another 100,000 from Fiat S.p.A.

Maruti -- a unit of Japan's Suzuki Motor Corp. is investing 17 billion rupees ($304.93 million) to set up a new diesel-engine plant, which is likely to start production by the middle of 2013.

The new plant will produce 150,000 diesel engines in 2013 and 300,000 in 2014.

The prices of diesel are controlled and subsidized by the Indian government because of its impact on inflation -- India's trucks and most trains run on diesel. In New Delhi, for instance, diesel costs 41.32 rupees a liter, compared with 68.46 rupees a liter for gasoline.

Because of this price gap, demand for diesel-run cars has far outstripped that for gasoline autos. But while a slowing local economy, high interest rates on loans as well as steep gasoline prices have crimped over demand for petrol cars, the appetite for diesel-powered vehicles has remained steady.

Maruti said earlier this year that sales of its gasoline cars fell 15% in the year through this March, but sales of diesel cars rose 35%.

It expects sales of its gasoline-run vehicles to fall by 6% in the financial year which started this April 1, but that of diesel-run vehicles to rise by at least 10%.

This change in demand has made companies such as General Motors Co. and Toyota Motor Corp. ramp up production of diesel vehicles.

At Tuesday's meeting of shareholders, Maruti Chairman Bhargava also addressed the issue of violence at the company's factory at Manesar, where a July 18 workers' riot resulted in the death of a senior manager, injuries to more than 100 people and fire damage to several parts of the facility.

Mr. Bhargava said that 700 of 1,000 workers at the factory have rejoined work, and that the company is "sure of resuming full production in the shortest period of time."

Maruti declared a lockout at the plant on July 21, saying it would resume production only when it is sure that employees would be safe. The company resumed partial production last week amid heavy security.

"These are not the happiest of circumstances, because what happened on July 18..." is unprecedented in Maruti's history, Mr. Bhargava told the company's shareholders.

He said that Maruti and the local state government are trying to bring to justice all the people guilty of the July 18 violence.

The company lost 21 production days, output of about 36,000 vehicles and incurred a revenue loss of nearly 14 billion rupees due to the lockout.

Maruti has another plant in Gurgaon -- near Manesar -- where production wasn't affected.

Suzuki Motor's Chairman Osamu Suzuki is currently on a week-long visit to India to assess the situation at the plant. Maruti contributes at least 30% of the Japanese company's pretax profit and 46% of its overall production outside Japan.

Looking to the future, Mr. Bhargava said that there has been little improvement in the automobile industry's problems.

Maruti, like most automobile companies in India, has been hit by a demand slowdown caused by high interest rates and fuel prices.

"The economic conditions the world over are not conducive for business. Whether it's the Euro crisis [or] the unexpected fall in the value of the rupee. Therefore we do have a slowdown in demand, we have a slowdown in economies," he said.

Local industry group the Society of Indian Automobile Manufacturers recently lowered its car sales growth forecast for the year through March 2013 to 9%-11% from 10%-12% earlier.