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Auto sector disappointed

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Our Bureaus

Mumbai/Bangalore/New Delhi, Feb. 28

THE automobile industry is disappointed over the absence of excise duty relief in today's Union Budget.

The industry had been hoping to see the duty on passenger vehicles with seating capacity of 13 or less reduced to 16 per cent by removing the existing additional duty of eight per cent.

The industry is being overlooked at a time when the automobile sales growth rate in the Indian market is one of the highest in the world.

However, the one million units plus sales anticipated this fiscal come at a rising cost, as input costs have escalated.

Further, from April, new norms - including those governing emission and safety - come into place, which is likely to be accompanied by price revision.

"This will be a year of price increases," said Mr Anand Mahindra, Vice-Chairman & Managing Director, Mahindra & Mahindra Ltd.Within that, any excise duty relief would have been helpful as it offers a retail cushion against the plethora of input costs waiting to spill into the market.

As Mr Ravi Kant, Executive Director, Tata Motors, said, it wasn't as though a globalised industry like automobiles was expecting the Budget to create demand. "That is for the auto industry to do by itself."

But an excise duty reduction would have helped a new set of realities ease into the market.

"To that extent the Budget was disappointing," said Mr Praveen Kadle, Executive Director, Tata Motors, referring to the elusive duty relief.

Mr K.K. Swamy, Deputy Managing Director, Toyota - Kirloskar Motor: It is disappointing for the auto industry. We expected a further reduction in excise duty primarily because when the excise duty was reduced to 24 per cent from 32 per cent in 2003, the industry grew over 50 per cent cumulatively since then.

Riding on the back of the boom, the Government received more than what they had given away.

Hence, the industry's expectations were justified. We are not sure why the Government decided not to reduce the duty further. It is a clear indication that the Government still considers cars as a luxury item.

Mr Jagdish Khattar, President, SIAM, while stating that the Budget provides for a growth environment for the automobile industry added that "the Government may have lost an opportunity to address the needs of the consumers by reducing excise duty on passenger vehicles, as the prices are set to increase because of the move to Euro III. The growth rates may decline". A reduction in excise would have negated the impact of the price increase brought about by upgrading to newer emission norms.

(This article was published in the Business Line print edition dated March 1, 2005)
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