With a few days left to go for the June 30 validity of the excise duty cuts on passenger cars, two-wheelers and commercial vehicles, announced in the February 17 interim Budget, automobile manufacturers in India are a worried lot.
17 Jun 2014 | 2451 Views | By Shobha Mathur
With a few days left to go for the June 30 validity of the excise duty cuts on passenger cars, two-wheelers and commercial vehicles, announced in the February 17 Interim Budget, automobile manufacturers in India are a worried lot.
A senior-level SIAM team led by president Vikram Kirloskar called ...
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With a few days left to go for the June 30 validity of the excise duty cuts on passenger cars, two-wheelers and commercial vehicles, announced in the February 17 Interim Budget, automobile manufacturers in India are a worried lot.
A senior-level SIAM team led by president Vikram Kirloskar called on the ministers of Commerce, Road Transport, Environment and Heavy Industries on June 16 and 17. The objective of these meetings, says SIAM, was to apprise the ministers of the current status and challenges being faced by the industry. The SIAM delegation also highlighted the potential of the industry to contribute to manufacturing growth, exports as well as to the economy as a whole, including rural India.
The specific suggestions made included continuation of the reduced excise duty on vehicles, new foreign trade policy, enhanced export incentives for vehicles, streamlined and free inter-state movement of vehicles, promotion of electric and hybrid vehicles and prevention of overloading, encouraging alternative fuel vehicles, enhancing road safety, emission and fuel efficiency norms, fleet modernisation and scrappage policy.
In an official statement, Kirloskar said: “We were very encouraged by the response of all the ministers and feel confident that the government would take a clear and holistic view of the automotive industry and work towards creating an enabling stable policy framework to ensure sustained growth of the auto industry.”
It is understood that, in a bid to give a fillip to domestic sales, SIAM, in its representation to the government last month, had sought a further lowering of duties on large cars from 24 percent to 20 percent and simplification of excise duty slabs on cars by moving to a two-tier system from a three-tier system.
The Interim Budget had cut excise duties for small cars, two-wheelers and commercial vehicles from 12 percent to 8 percent, for SUVs from 30 percent to 24 percent, and for large and midsized cars from 27 percent to 24 percent and from 24 percent to 20 percent respectively. The reduction to 8 percent for passenger cars took duties on cars to the same levels as 2010 when the Centre had announced sops for the sector that was struggling in the aftermath of the global slowdown. For the auto component sector, there was a reduction in excise duty on auto components (under Chapter 84 and Chapter 85) from 12 percent to 10 percent and on vehicles. At the time, while welcoming the February excise duty cuts, Dr Pawan Goenka, executive director and president (auto and FES), Mahindra & Mahindra, had said, “If these initiatives are maintained in the final FY15 Budget, it should be a much-needed positive stimulus for the overall manufacturing sector in India.”
However, despite the excise duty cuts, buyers did not exactly throng vehicle showrooms and OEMs are hard-pressed to come up with better numbers. For 2013-14, passenger car sales fell by 5.01 percent to 1,786,899 units and overall passenger vehicles (including cars, UVs and vans) dropped 6.05 percent to 2,665,015. CV sales were down by 20.23 percent to 632,738 units and three-wheeler sales down by 10.90 pe4rcent to 479,634 units. The two-wheeler industry was the sole sector in positive territory with growth of 7.31 percent to 14,805,481 units. Overall domestic industry growth was just 3.53 percent comprising 18,421,538 units.
With the change of government at the Centre – and a stable one at that – consumer sentiment has since improved and April and May 2014 sales have seen a marginal rise in growth but industry is hopeful the government will turn more pro-active towards the auto sector, which is a barometer of the economy. The industry currently accounts for almost 7 percent of the country’s GDP and employs about 19 million people both directly and indirectly.
Earlier today, Autocar Professional spoke to Vishnu Mathur, director general of SIAM, who said the industry body has reiterated its recommendations to Union commerce minister Nirmala Sitharaman for continuation of the excise duty cuts to bail the industry out of the ongoing downturn. Other suggestions include a fleet modernisation programme to take polluting vehicles off from Indian roads and the rollout of the Goods and Services Tax (GST) to streamline the tax structure across the country.
Ahead of the Budget, both automakers and component suppliers have been asking for implementation of the much-awaited GST to ensure there is a fair pan-India tax structure and also speedy clearance for infrastructural projects which will breathe new life into the economy – and the automotive sector.