The Hindu Business Line : Stimulus assistance to State transport bodies welcomed

Chennai, Jan. 5 The funding assistance to State Transport Undertakings, promised in the recent ‘stimulus package’, has been hailed as a measure that is timely and useful, as it comes at a time when over 30,000 over-aged State-owned buses are in urgent need of replacement.

Pointing to this, Mr R. Seshasayee, Managing Director, Ashok Leyland, has noted that this measure is a fine “alignment of public good and demand stimulation”.

Mr Seshasayee, who welcomed the stimulus package as a tripod of “cash, capital and confidence”, said the package would spur demand for trucks, albeit with a lag, benefiting from greater investments in housing and infrastructure.

The reduction in CRR rate will address the need for cash availability in the system. However, credit availability at comfortable rates in many sectors of the economy (including commercial vehicles) is an issue, given the risk perception of banks. Therefore, there is a case for RBI refinancing, at a concessional rate, truck loans by both banks and accredited NBFCs, so that even after adding the risk premium, loans at affordable interest rates are available to the operators, he said.

Mr S.P. Shah, President of Federation of Automobile Dealers Association (FADA), told Business Line that though the second stimulus package is positive, it may not help the commercial vehicle industry. This is due to the lack of demand for cargo, mainly iron ore, moving — which had been a big business in the recent years. The package would be beneficial only if there is adequate ‘load’ — nobody is going to buy a truck to avail himself of the higher depreciation the package allows.

Mr Jayendra Kachalia, Director, Navneet Motors – the MAN truck dealer in Mumbai, said over 70 per cent of the truck buyers are individuals and the rest are corporates. So the benefit will be limited to the large fleet operators. Moreover, the finance, which is dearer now, is the key to take advantage of depreciation.

Mr Vijay Bhandari, Chairman, Bhandari Automobiles - Tata Motors’ dealer based in Kolkata, said increase in depreciation would certainly help dealers at a time when the market is seeing marginal rise in demand.

Mr N. Krishnamoorthy, President, Dealership Business, T V Sundram Iyengar & Sons Ltd, an Ashok Leyland dealer, while noting that the accelerated depreciation would help by enabling fleet operators “retain hard-earned profits and use it for vehicle replacements”, said the package, being the final one, “will make people start acting without waiting for something better to come”.

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