A good drive

While the Budget has left a positive feel in general, the auto sector has mixed feelings about it. Of course, the details are yet to emerge, but what is welcome is the intended correction in the inverted duty structure where raw materials were charged a higher rate of excise duty and finished products were charged a lower rate — in situations where there was limited value addition, it led to unutilised input credits that translated effectively into higher costs.

The Budget proposal to add 1 lakh km of roads augurs well for the auto sector. With motorable roads increasing, the demand for personal mobility would concomitantly increase — a good long-term objective.

Finance Minister Arun Jaitley has kickstarted the move to reduce the transport sector's dependence on fossil fuels.

This is probably the best time to encourage the use of hybrid and electric vehicles and the long-term road map has been announced via the scheme for faster adoption and manufacturing of electric vehicles.

This would over time wean consumers away from using internal combustion engine vehicles and using the significantly less polluting electric and hybrid vehicles.

The money saved from importing crude oil would be better used to provide monetary incentives to consumers to buy and use electric and hybrid vehicles.

The Budget allocation of ₹75 crore for encouraging electric vehicles and for the continuance of the lower duty structure on parts for electric and hybrid vehicles augurs well for the energy security of the country.

As far as the commercial vehicle sector is concerned, the increased rate of customs duty on imported commercial vehicles to 20 per cent is welcome — this would give a much needed fillip to the commercial vehicle segment.

Of course, the auto sector, overall, has reasons to be unhappy as the effective incidence of tax on the consumer will continue to remain high at about 60 per cent of the manufacturing cost of the vehicle — hardly the best recipe for a Make in India campaign.

However, hidden in the detail is one good development — incidence of excise duty on vehicles used as ambulances now gets reduced.

A bit of low hanging fruit that Jaitley missed out on was the announcement of a scrappage policy for vehicles which would have had the twin beneficial impact of ridding our roads of smoke-belching vehicles and simultaneously kicking up demand for newer vehicles.

The writer is Vice-Chairman of Toyota Kirloskar