For automakers in India, 2010 was a year of boom as they witnessed record sales of over 12.20 million units. Car sales soared by 31 per cent to almost 20-lakh units, while motorcycle volumes climbed by 27 per cent to 94-lakh units.
And if one goes by the sales in January, there is little doubt in the minds of industry watchers that this year too some records would be easily broken. However, auto manufacturers are still looking at some incentives from Finance Minister Pranab Mukherjee in his budget proposals for 2011-12 to help further boost their sales.
The Society of Indian Automobile Manufacturers (SIAM) has already forwarded its ‘wish list' to Mr. Mukherjee, seeking a status quo in the current tax structure, while the Automotive Component Manufacturers Association of India (ACMA) has sought setting up of a fund for technology upgradation.
“We want the customs duties to remain at the current level and are hoping for no rollback of excise. However, anomalies in the taxation procedures should be corrected,” said SIAM Director-General Vishnu Mathur. At present, small cars and two-wheelers attract 10 per cent excise duty, while it is 22 per cent for bigger vehicles.
Higher commodity prices, increased interest rates and galloping inflation have left car-makers a worried lot as they are hurting their bottomlines in the highly competitive auto market. Recently, major carmakers announced increase in prices and any adverse proposal in terms of taxes will force automakers to go for another round of price hike, which in turn may affect sales growth.
“We do not want any drastic changes in the tax rates. The interest rates are anyway going up with rising inflation, so any added challenge will only prove detrimental to industrial growth,” said Maruti Suzuki Chairman R. C. Bhargava. Similarly, General Motors India Vice-President P. Balendran urged the government to focus more on the infrastructure sector such as strong road network to help the auto sector.
“We would like the Centre to have a renewed focus on infrastructure growth, besides labour law reforms. Inflation should also be controlled through better monetary policy,” he added.
According to Yamaha Motor India Business Head Roy Kurian, “A focus on credit availability to two-wheeler loans and reasonable interest rates could boost sales. The customs duty on commodities such as steel and aluminium should not be raised as it will put pressure on the pricing of automobiles in general and two-wheelers in particular.” On the other hand, ACMA Executive Director Vinnie Mehta said: “Besides a stable policy regime, we want the government to set up a technology upgradation and development fund to take the Indian auto industry to a new level.”
Another segment that could be in focus this budget is eco-friendly vehicle as companies are eagerly awaiting major incentives for alternative-fuel vehicles such as CNG, LPG and electric vehicles to boost their sales. The industry wants reduction in import taxes on batteries and lowering of excise duties for localised components.
“Though the import duty on battery for vehicles is 4 per cent, the same for spare batteries is 26 per cent. This needs to be brought down as the battery life on new vehicles is limited,” said Society of Manufacturers of Electric Vehicles Director (Corporate Affairs) Sohinder Gill, who is also CEO of Hero Electric.
Keywords: Run-up to budget 2011-12