Auto wants kid-glove treatment, and ‘let stimulus continue’

With the Congress led-United Progressive Alliance (UPA) winning a fresh mandate, the automobile industry is hoping the system will find some much-needed stability.

It also hopes the new government will treat auto as a priority sector and attend to some pressing concerns, mainly differential excise duty, lack of retail finance and lack of focus on infrastructure.

Pawan Goenka, president, automotive sector, Mahindra & Mahindra, said first and foremost (there should be) no reversal of the financial stimulus packages announced over the last six months.

“The government must also review and amend large differences in excise duty on different sizes of vehicles”.

Rajeev Kapoor, president and chief operating officer, Fiat India, concurred, and hoped the issue of differential excise duty, “which is a pinching one”, is addressed at the “earliest”.

The cut in excise duty announced in the stimulus package — to 8% from the earlier 10% — was a big relief to the sector.

But it also created a problem of differential excise duty, which is 8% for the small cars, 16% plus Rs 15,000 additional excise duty for vehicles above 1500-2000 cc and 16% plus Rs 20,000 for vehicles above 2000 cc.

The Society of Indian Automobile Manufacturers (Siam) had earlier objected
to this, saying a car category based on length or engine displacement should not be encouraged as the other segments would suffer.

Shinzo Nakanishi, managing director of Maruti Suzuki, told DNA: “I’m sure that the new government will re-enforce its initiative to promote automobile industry as key economic driver.”

Sandeep Singh, deputy managing director (marketing), Toyota Kirloskar Motors,
said, “We expect the new government to encourage eco-friendly vehicles. We pay a very high import duty on hybrid cars. The government should look at giving us some advantage so that we can bring these cars to the country.”

Another issue over which the auto sector has been seeking relief is high interest rates. The industry hopes that retail finance will pick up with more participation from private banks. Though public sector banks have become active lately, the conversions take long, affecting business.

P Balenderan, vice-president (corporate affairs), General Motors India, said, “There has to be renewed focus on infrastructure. If more vehicles are sold, the infrastructure spend will go up, in turn the demand for commercial vehicles will get a boost. Also, the new government should bring in flexible labour reforms and rationalise the tax subsidies.”

Siam had said that had it not been for the stimulus packages, passenger vehicle sales would have been down 3% or no growth, while commercial vehicles would have had a decline of 30-40%.

The stimulus packages announced in December and January, which reduced Cenvat by 4%, allowed manufacturers to reduce product prices.

It also gave the commercial vehicles segment a boost with state governments getting a one-time assistance under the Jawaharlal Nehru National Urban Renewal Mission for purchasing buses for urban transportation.

Besides, leading public sector banks were allowed to provide a line of credit to NBFCs specifically for the purchase of commercial vehicles.