Pawan Goenka is categorical that excise duty levels for the automotive industry should stay intact till Budget 2015.

Mahindra & Mahindra’s Executive Director and President (Automotive, Farm Equipment and Two-Wheeler sectors) believes this is imperative in order to ensure that growth is assured at least through this calendar.

The previous UPA regime had announced substantial cuts in its Interim Budget of February. As a result, SUVs and large cars now carry a lower levy of 24 per cent (from 30 and 27 per cent respectively) while this is 20 (24) per cent in the case of mid-size cars and eight (12) per cent for commercial vehicles, small cars and two-wheelers.

While these duty levels are applicable only till June 30, Goenka maintains the auto industry still needs this fiscal support to continue as it is just about crawling out of an abyss. Top leaders of two-wheeler, car and truck companies say some positive sentiment is slowly beginning to return to the market, so there is no point unplugging a critical lifeline at this stage. “It is fine if duty levels are revoked in next year’s Budget. Doing it in July’s Interim Budget would be disastrous,” a two-wheeler executive says.

The industry had seen growth virtually collapse for the second year in succession when car sales fell by nearly five per cent in 2013-14 though two-wheelers grew seven per cent thanks largely to Honda and Hero MotoCorp. The worst hit was the commercial vehicle industry which almost imploded and numbers were down by over 20 per cent.

Yet, there is a section of the industry which does not buy the argument of lower excise duties fuelling growth. “GDP growth is down to less than five per cent, there are no jobs in the market and you expect people to buy cars?” asks an auto ancillary CEO.

According to him, the El Nino spectre would only make things worse, especially in rural India which is now increasingly accounting for a large part of two-wheeler and small car sales. If the monsoon is less than adequate this year, it could be a big blow to tractor sales.

But there is a sense of relief within the industry that the present Government will not be bogged down by the ‘coalition compulsions’ which had pretty much dominated UPA-2. The BJP has also traditionally been industry-friendly and has already made vocal its intent about investing in roads and highways.

Captains of the automotive industry say India just cannot afford to miss the bus through the remainder of this decade. And even though it is projected to be among the top five markets by 2018 with annual production of five million vehicles, China would be over 27 million units by that time. The slowdown over the last couple of years, especially the ‘policy paralysis’ of 2013-14, has caused a deep hole which will take time filling up.

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