The Hindu Business Line : Duty, taxation structure for auto sector needs radical changes: Montek

(From right) Dr Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, Mr Mukesh Ambani, CMD, Reliance Industries Ltd, Mr Jagdish Khattar, President, SIAM, and Mr R. Seshasayee, Managing Director, Ashok Leyland Ltd, at the inaugural session of the SIAM Annual Convention 2004 in the Capital on Wednesday. - Kamal Narang

New Delhi , Sept. 1

THE duty and taxation structure that governs the automotive sector needs radical changes, not marginal fiddling, Dr Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, said while speaking at the annual convention of the Society of Indian Automobile Manufacturers (SIAM), here today. While excise had been reduced substantially, it had been more than offset by an increase in road tax.

The growth of the automotive industry is linked to several factors of the economy and in order to spur its growth, it is important to look at the economy as a whole. One of the major sectors that require attention is, of course, the road infrastructure in the country, he said.

Dr Ahluwalia added that the growth of the trucking business, which is important for the growth of the automotive industry as a whole, has been slower than the rest of the sectors in the industry. He called upon the captains of the automobile industry to address this issue.

Meanwhile, speaking on the occasion, Mr Mukesh D. Ambani, Chairman and Managing Director of Reliance Industries Ltd, said the automotive industry needed to play a major role in "growth with an equitable distribution of wealth." The potential of the Indian automotive industry was huge as one in 60 vehicles made in the world was manufactured in India. "This should go up to one in 10," he said.

"The future of the Indian automotive industry is entwined with that of the country," he said. With reforms and a shift to a market-driven economy, new opportunities had opened up for the industry and customer expectations had gone up. However, the market economy still had to address the issue of equitable distribution of wealth.

Mr Ambani added that India had emerged as a global information technology (IT) superpower and the automotive industry needed to exploit this in terms of providing new services to its customers, vehicle-tracking and registration as well as vehicle design and manufacture. He also said that Reliance could partner with the Government and the automotive industry to develop suitable solutions, particularly in the field of information technology and alternative fuels.

In his welcome address, Mr Jagdish Khattar, President of SIAM and Managing Director of Maruti Udyog, pointed out several issues that hampered the growth of the automotive industry. Aspects such as issuing driving licences, measuring emissions, enforcing road rules and regional transport offices were under-regulated and road safety was poorly enforced.

In contrast to poor regulation in the above areas, there was over-regulation in the pricing of automotive fuels. The administered pricing mechanism was responsible for the huge difference in the cost of petrol and diesel and the adulteration of petrol with cheap additives such as kerosene, he said.

Mr Khattar said SIAM has prepared a blueprint entailing an outlay of Rs 1,700 crore that will enable the automotive industry to grow internationally as well as nationally. He said if these issues were addressed, India would become a global manufacturing hub for automotive components as well as small cars.

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