Car exporters likely to get more incentives next fiscal year

Car manufacturers in India, reeling under the effects of the withdrawal of excise duty exemptions, may have something to cheer about in the new fiscal year.

The Centre is examining the possibility of extending incentives for export of cars to all markets, including large ones such as the European Union.

“The Heavy Industry Ministry has proposed to the Commerce Ministry that car exports should be included in the ‘focus product’ scheme so that shipments to major markets are incentivised,” a Commerce Ministry official told BusinessLine .

Under the Focus Product scheme, an incentive of up to 5 per cent of the export value is given for exports of specific products to all markets.

Since automobile exports are going down despite the huge export potential, the proposal could be considered favourably, the official added.

India’s car exports declined 8.3 per cent to 2.68 lakh units in the April-September 2014-15 period, according to data from the Society of Indian Automotive Manufacturers (SIAM).

A pitch for inclusion of cars in the Focus Product scheme was made by the Heavy Industry Ministry in the ‘Make in India’ workshop as well, where it argued that such a sop would encourage manufacturing in India.

Hyundai Motor India Ltd, a top exporter, has shifted export of some models out of India.

So have Japan’s Nissan Motor and France’s Renault.

Global car companies have started favouring destinations such as Turkey or Eastern Europe to manufacture cars for the European market.

Under the present Foreign Trade Policy, an incentive of 2 per cent of export value is given to cars shipped from India to markets where the country has an insignificant presence, such as Bangladesh, Kenya, Kuwait, Pakistan, Russia, Singapore and Ukraine. China and Japan, too, were included.

However, if exports to a large market such as the EU are also incentivised, it would have considerable revenue implications.

“Incentives for all sectors, including cars, will have to be carved out of the total funds for all sectors sanctioned to us,” the official said.

And this may not go down well with other sectors.

“To give incentives for buoyant markets that are small, like South Africa, is fine.

“But giving it for Europe will involve a huge outgo,” pointed out Ajay Sahai from the Federation of Indian Export Organisations.

The Commerce Ministry, however, is hopeful that the Finance Ministry will be generous in the coming fiscal year as it did not give any new sops for exports in the current fiscal year because of financial constraints.

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