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Excise duty cut, a boon for small carmakers `Small cars' are Maruti 800, Wagon R, Zen, Alto, Hyundai Santro, Indica diesel

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The beneficiaries
Cars that would fall under the proposed definition include the Maruti 800, Wagon R, Zen, Alto, Hyundai Santro and the diesel variant of Tata Indica.
Maruti's proposed Swift diesel, which will come with a 1.3 litre diesel engine later this year, is also likely to fall under this category.

SMALL CARS GAIN: Prices of small cars such as Indica, Maruti 800, the Zen, Alto, Santro and others are set to go down on excise duty cuts.
SMALL CARS GAIN: Prices of small cars such as Indica, Maruti 800, the Zen, Alto, Santro and others are set to go down on excise duty cuts.

Our Bureau

New Delhi, Feb. 28

The Finance Minister in his Budget has proposed a cut in excise duty on small cars from 24 per cent to 16 per cent. Small cars have been defined as petrol cars with an engine capacity not exceeding 1,200 cc and not exceeding 4,000 mm in length, and diesel cars of engine capacity not exceeding 1,500 cc and not exceeding 4,000 mm in length.

Cars that would fall under the proposed definition include the Maruti 800, Wagon R, Zen, Alto, Hyundai Santro and the diesel variant of Tata Indica. Maruti's proposed Swift diesel, which will come with a 1.3 litre diesel engine later this year, is also likely to fall under this category.

Mr Jagdish Khattar, Managing Director, Maruti Udyog Limited

, said that the measure would not only boost the popularity of small cars in the country, but also help establish India as an export hub for small cars. "Further, more players will enter this segment in India. The segment saw a growth of about 5-6 per cent till about December-January this year, this may now increase to a double-digit figure next year," he said.

Mr B.V.R. Subbu, President, Hyundai Motor India

, said that the policy would help accelerate sales of small cars and is a positive step for the domestic automotive industry.

India is not the only country that now has a separate policy for small cars. Japan, Korea and Brazil have similar policies.

Not everyone's happy

The step, however, did not go down well with all car manufacturers.

"The Finance Minister's decision to reduce excise duty from 24 per cent to 16 per cent on small cars is disappointing for car manufacturers like Honda. We feel that any concessions for the automobile industry should have been extended across all segments of cars. We have been highly appreciative of the Government's fair duty structure, but a differential duty structure will lead to skewed growth,"

Mr Rajiv Saharia, General Manager, Sales & Marketing, Honda Siel Cars India

, said.

He added that the industry has seen maximum growth in the mid-size car segment, with small-car buyers upgrading to bigger cars. "With a segmented duty structure, the gap between a small car and a sedan becomes larger, making the upgradation that much more difficult for the consumer."

Mr Rajeev Chaba, President & Managing Director, General Motors

, said that the Budget was not on expected lines for the passenger car industry. "We expected the excise duties to come down for all cars and not only on small cars," he said.

Mr Bharat Doshi, Executive Director, Mahindra & Mahindra,

said from an automobile industry perspective, while the reduction in excise duty for small cars is a step in the right direction one wishes he had remembered that vehicles sold in rural areas, like utility vehicles, could also have merited similar consideration.

With inputs from Mumbai Bureau

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