No special drive: auto parts sector
`There's further scope for reducing raw material duties to Asean levels'

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NO GAIN FOR COMPONENTS: The auto component sector is disappointed with the Budget.
NO GAIN FOR COMPONENTS: The auto component sector is disappointed with the Budget.

Our Bureau

New Delhi, Feb 28

While welcoming the broad thrust given to the manufacturing sector, the Auto Components Manufacturers Association (ACMA) felt that the Finance Minister had stopped short of making any specific announcement to promote the automotive sector.

The reduced customs duty maximum level of 7.5 per cent on key metallic raw materials and inputs for the auto-component industry would bring down input costs and encourage domestic value-addition and manufacturing.

Mr Ashok Taneja, President, ACMA

, however added that there was scope for further reducing raw material duties to Asean levels at 0-5 per cent.

He felt that the most significant announcement by the Finance Minister was the reduced excise duty on small cars to 16 per cent, a step which would propel India as a global manufacturing hub for small cars and directly enable the auto-component supplier industry to attain volumes and, hence, globally competitive scales.

The additional 4 per cent CVD on all imports is also a welcome move as it would level the playing field for domestic manufacturers to some extent, specially for sales in the aftermarket, Mr Taneja said.

However, he felt that the Finance Minister could have waited for 1-2 years to reduce the peak rates of duty from 15 to 12.5 per cent. With this reduction in customs duty on components, many key component systems attract much lower duty in India as compared to ASEAN countries, for example Thailand, he clarified.

Mr Baba Kalyani, Chairman, Bharat Forge

: I am particularly happy that the automobile and auto component sectors have received greater attention. Specifically, reduction in excise duty on small cars is welcome and will greatly boost demand for automotive components. I would have liked this reduction to apply to a larger section of the automotive industry. The 180 SSI items to be de-reserved will hopefully include some automotive components.

Jay Galla, Managing Director, Amara Raja Batteries,

said the company welcomes the reduction of excise duty on small cars, which will spur growth of passenger cars and the ancillary industries.

However, while the peak rate of customs duty on finished batteries has been reduced from 15 per cent to 12.5 per cent, customs duty on lead, the primary raw material has been left untouched. This has an adverse effect on the domestic battery industry as the duty differential between the lead and finished products has come down from 10 per cent to 7.5 per cent.

(This article was published in the Business Line print edition dated March 1, 2006)
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