Finance Minister P. Chidambaram appears to have taken a clue or two from marketing whiz kids. Or, how else could one describe this ‘limited period offer’ for the auto sector! Seemingly waking up from a long slumber, he suddenly realises that the auto sector needs a lifeline, and cuts excise duty on automobiles. What is forgotten in the initial euphoria is the fact that these cuts are valid for a limited period up to June 30.
What is he trying to achieve by these interim cuts? At best, Mr. Chidambaram could be helping manufacturers to get rid of piled-up stocks. It is well known that there are many intermediaries in the automobile value chain. What happens to vehicles that have already been shipped to dealers? Who will compensate the dealers who have taken the vehicles prior to this duty cut announcement?
Car makers always come out with announcements of impending price hikes in December every year. They use this tactic to entice buyers to rush in to book vehicles and thus shore up year-end sales numbers. What the Finance Minister has done is akin to this strategy. Will this ‘limited period offer’ be sufficient for kick-starting a revival in the automobile industry, especially at a time when interest rates are still ruling high? That indeed is a moot point. Maybe his successor will have less compulsions while dealing with the auto industry. Mr. Chidambaram has felt no constraints in making allocations for the fiscal year 2014-15. Be it to ministries/departments which run key flagship programmes of the UPA or to the Railways, Mr. Chidambaram has not applied the ‘vote on account’ yardstick, while indicating fund allocation for the next fiscal! This different application of ‘vote on account’ principle is bound to kick up a political row.