Union Finance Minister Pranab Mukherjee's budget proposals for 2011-12 laid special focus on promoting green and clean technology for the fast-growing Indian automobile sector.

He not only announced tax sops to promote environment-friendly vehicles but also proposed the setting up of a “National Mission for Hybrid and Electric Vehicles.”

“The Indian automobile market is the second fastest market in world and has shown nearly 30 per cent growth this year. World over, substantial investments are being made in the field of hybrid and electric mobility. To provide green and clean transportation for the masses, the National Mission for Hybrid and Electric Vehicles will be launched in collaboration with all stakeholders,” Mr. Mukherjee said while presenting the budget.

Similarly, the Minister proposed to cut excise duty on development and manufacturing of hybrid vehicle kits to 5 per cent from 10 per cent, besides fully exempting customs and countervailing duty (CVD) on import of special hybrid parts. Currently hybrid vehicles enjoy a concessional excise duty rate of 10 per cent. “In addition, a concessional rate of excise duty of 5 per cent is being prescribed to incentivise their domestic production,” he added.

The auto industry has welcomed the budget proposals that would help promote environment-friendly vehicles. “The Finance Minister has given a clear message to the industry by announcing the setting up of National Mission for Hybrid and Electric Hybrid Vehicles. Several fiscal measures for promoting such environment-friendly vehicles will provide a significant incentive to promote the development, manufacturing and sale of such vehicles in India,” said Society of Indian Automobile Manufacturers (SIAM) president Pawan Goenka.

Similarly, president of the Society of Manufacturers of Electric Vehicles Naveen Munjal said the industry would be encouraged by such steps. “The government is finally realising the importance of electric and hybrid vehicles in the Indian automotive sector. This is bound to give a huge boost to the sector once the final policy is formulated,” he added.

The Automotive Component Manufacturers' Association of India (ACMA) has also welcomed the government's initiatives and said it was a step in the right direction and would help improve the environmental impact of the automotive industry.

On the exemption of customs duty on some electric and hybrid vehicle parts, ACMA president Srivats Ram said: “While this may be a benign measure in the short run, we must ensure that we encourage local manufacturing and the entire value-chain, including components, are manufactured in the country, in the long run.”

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