The Heavy Industries Ministry will press for continuation of excise relief for the auto sector in the full Budget, which is likely to be presented in July by the new Government.

The existing relief will end on June 30. “Excise cut announced in the Interim Budget is yet to give the desired result. This necessitates duty relief to continue,” a senior Heavy Industries Ministry official told Business Line .

In the Interim Budget, Finance Minister P Chidambaram had announced excise duty cuts on small cars/motor cycles/scooters/commercial vehicles to 8 per cent (from 12 per cent); on sports utility vehicles to 24 per cent (from 30 per cent); large-segment cars to 24 per cent (from 27 per cent); and mid-segment cars to 20 per cent (from 24 per cent).

Two-wheelers grow Post this, auto sales in all categories did register an increase, but it was mainly driven by two-wheelers sales; passenger vehicles failed to accelerate.

According to the Society of Indian Automobiles Manufacturers, total passenger vehicle sales declined by four per cent year-on-year to around 2.18 lakh units in February as against around 2.26 lakh units in February 2013.

And, the declining trend continued in March also by five per cent year-on-year (around 1.71 lakh units versus around 1.80 lakh units in March 2013). Even for the month of April the situation is not encouraging.

However, the overall sales (across all categories) of the industry are growing because of the positive numbers from segments such as two-wheelers.

The industry sold around 15.24 lakh units in February as compared with 14.51 lakh units in February 2013.

Similarly, in March also, the overall sales across all categories grew 13 per cent to around 16.67 lakh units from around 14.87 lakh units in corresponding month last year.

Job creator Heavy Industries Ministry officials said that the auto sector is one of the biggest job creators, directly and indirectly.

It is believed that every direct job created in an auto company creates 3-5 ancillary jobs.

Last month, SIAM president Vikram Kirloskar had said that the decline in auto sales hit the industry hard and employment, mainly of contract and temporary workers, have been affected.

“We at SIAM have not done a calculation of how much job losses were there, but I personally feel that across the entire value chain in the auto industry, from raw materials to dealerships, there could be around 1-1.5 lakh job losses,” he had mentioned.

Ministry officials are hopeful that the new Government will give priority to job creation in manufacturing.

At the same time, revenue loss due to duty cut could be compensated by increase in sales volume.