FROM THE RESEARCH BUREAU. Sops or none, autos will be fine

The most predictable excise duty cut proposal was handed out to the auto industry much before the Budget day.

So, when many other sectors in the economy are fighting for a new lease of life, it would only have been appropriate for the auto sector to not expect anything.

But hope is life. So the industry hoped for many things, including a uniform excise duty structure bringing down the higher duties for vehicles such as SUVs, a scheme for doing away with dated cars and scrapping aged commercial vehicles, an increase in depreciation allowance on passenger vehicles to encourage sales, support for manufacture of electric and hybrid vehicles and rolling out of the GST to help standardise the cost of selling cars across the country.

But what the industry got was only an excise duty exemption for parts of tractors moved between two factories of the same manufacturer and a promise to work towards rolling out the GST sooner than later.

Be realistic

Post the budget, let’s be realistic. The industry is indeed a cyclical one and what goes down will automatically comes up. This is because demand for vehicles is derived demand. It is very much dependent on how much money you put in the hands of the consumer.

This will come from higher incomes or salary increases, which will come when agriculture and industry grow.

Even commercial vehicle sales fit into this equation. Fleet operators will replace their trucks when they can pass on every cost increase, pay interest on the loan taken for the vehicles, still have a good profit margin and yet not lose out on haulage.

This will come when demand for freight improves dramatically which, in turn, is possible only when agriculture and industry grow.

So, at a time when the country’s finances are tight, one should have expected Jaitely to not have doled out any more sops.

More so, when several measures to boost road and industrial infrastructure will definitely have its ripple effects on auto demand.

That said, the fillip for green vehicles, given out in small measures in previous budgets, could at least have been extended in some form.

Especially because the Finance Minister seemed to have a fetish for clean and renewable energy, considering the excise duty cuts for equipment used in wind and solar power generation and bio-CNG.

Given the small base for electric and hybrid vehicles, it would not have been too much of a drain on the exchequer. At the same time, it would have encouraged investments.

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