Over the last few weeks, top government officials had indicated that the fiscal stimulus would be fully rolled back and excise rates raised by two percentage points.
Just before the finance minister rose to begin his Budget speech, automobile industry’s top guns seated at a CII forum were visibly apprehensive of an excise duty hike.
Over the last few weeks, top government officials had indicated that the fiscal stimulus would be fully rolled back and excise rates raised by two percentage points.
So it was no surprise when a collective cheer went up around the hall on hearing Mukherjee’s announcement: the 10% excise duty rate will be maintained.
Not only has the FM spared the excise burden, he has also promised robust economic growth which should boost sales of cars and bikes as people are expected to have increased disposable incomes. Mukherjee also announced a slew of measures to boost indigenous production of hybrids and electric vehicles.
Pawan Goenka, President of the Society of Indian Automobile Manufacturers (SIAM), says that by not hiking excise duty on vehicles, the FM has saved the industry from another price hike. “Also, there were fears of imposition of a new tax on diesel vehicles, which did not happen. So the industry is relieved.”
But Goenka’s pet peeve, reduction of excise on large cars (cars longer than 4 m and with engine displacements larger than 1200cc for petrol or 1500cc for diesel are charged at 22%), was not addressed.
RC Bhargava, chairman of Maruti Suzuki India, said there was no particular reason for cheering FM’s decision to spare the 2% excise duty hike. “It’s good that the excise was not raised but had it been raised, we would have dealt with it...it wasn’t a make or break provision.” But Bhargava said the prediction of 9% GDP growth, lowering of fiscal deficit, steps to control inflation—all these factors will help boost car sales.
Venu Srinivasan, CMD of TVS Motor Co, echoed Bhargava’s sentiments, saying, “Any increase in excise tax would have been inconsequential in comparison to the current interest rates and higher oil prices, but it is a welcome move.”
Arun Jaura, VP Technology and Head of Eaton India Engineering, says development of indigenous hybrids will get accelerated with the announcement of sops. “These provisions will also create better opportunities for supply chain and vendor development for hybrids.”
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