The Hindu Business Line : ‘Stimulus may not revive commercial vehicle sales’

Chennai, Jan. 3 Non-banking finance companies (NBFCs), which finance the purchase of half the commercial vehicle sales in the country, say the ‘50 per cent accelerated depreciation’ for commercial vehicles, announced by the Government on Friday, may not revive flagging commercial vehicle sales.

Mr T.T. Srinivasaraghavan, Managing Director, Sundaram Finance, a company that has been in the business commercial vehicle financing for over five decades, feels the measure would have “a marginal impact” on commercial vehicle sales. Depreciation is not the primary driver for commercial vehicle sales but would be a peripheral attraction, he said.

Mr R. Sridhar, Managing Director, Shriram Transport Finance, said the move might at best help only those of the large fleet operators who may have postponed their purchases of commercial vehicles. Small truck owners may not be able to leverage the depreciation benefit “as many of them do not file tax returns,” he said.

Shriram Transport is primarily in the business of financing purchase of used trucks and deals mostly with small operators.

Another senior official of an NBFC, who did not want to be named, observed that many fleet operators may not, in the first place, be making profit — taxes on which could be avoided by the higher depreciation.

Rate cuts on cash reserve ratio and repo rate will ensure that the loans are available at lower interest rates. However, it would be significantly dependent on the “confidence” and motivating factor of truck operates in terms volume increase in freights operations which has been declining so far, said Mr Sridhar.

To kick-start the demand for commercial vehicle sales, there has to be strong economic growth where material are transported from one location to another, in simple terms there should be more freights than trucks while it is vice versa currently, said Mr Srinivasaraghavan.

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