Auto sector to see investments worth Rs.250,000 crore: Praful Patel

The Society of Indian Automobile Manufacturers (SIAM) on Monday said domestic passenger car sales saw its slowest growth in 27 months in June at 1.62 per cent due to high loan interest rates. Another reason behind it was production loss due to strike at the Manesar (Haryana) plant of largest carmaker Maruti Suzuki, prompting SIAM to call for reforms in labour laws and allowing lay-offs of employees during a slowdown with adequate unemployment benefits.

“In June 2011, car sales stood at over 1.43-lakh units…this is the slowest growth rate since March, 2009, when the increase was just 1.16 per cent. All the segments grew moderately. Interest rate hike and rising fuel prices have affected the consumers' decision to buy vehicles,” SIAM President Pawan Goenka told journalists here.

The auto industry has started slowing down in this fiscal with the passenger car segment growing by only 7 per cent in May. Before that, that car sales grew by just single digit was in June, 2009, at 8.23 per cent. The passenger vehicle segment's lower than expected performance was also because of the 13-day long strike at the Maruti Suzuki's plant in June that had resulted in production loss of about 12,600 units. “Maruti is the market leader in the car segment. The production loss due to the major strike at its plant affected the entire segment's performance. Tata Motors' sales were also down,” Mr. Goenka added.

Talking about labour reforms, Mr. Goenka said it was high on the agenda of SIAM for quite some years. “We don't have any policy on laying-off during slowdown. Labour problems hamper the employment prospects of permanent staff,” he said.

The SIAM President also pointed out that the auto companies should be encouraged to have more permanent employees like in the U.S., where the firms were allowed to fire them in case of a slowdown and a government fund takes care of them for a certain period or till they join a new job. “Something similar is needed here. Permanent employees have to grow. The law should give the flexibility to handle the number of people during slowdown that means laying-off,” Mr. Goenka added.

PTI reports

20 million new jobs

The Centre on Monday said the Indian automobile industry was expected to invest about Rs.250,000 crore in the next ten years, by which time the four-wheeler segment was estimated touch ten million units annually.

“There will be a significant investment worth Rs.250,000 crore in the next ten years in the auto sector. It will create 20 million jobs by 2020. We are keen to see orderly growth and sustainable growth,” Minister for Heavy Industries and Public Enterprises Praful Patel told reporters here.

The production of four-wheelers was expected to grow to ten million units annually by 2020 from 2.5 million units currently, he added.

“Current turnover of the (auto) industry is $75 billion, while exports are worth $11 billion. It is a major contributor to the manufacturing sector in India, contributing close to 21 per cent,” Mr. Patel said after meeting the top executives of various auto companies.

He said the government would set up various task forces on issues related to taxation, land acquisitions, labour unrests and skill development for the auto industry.

When asked about the extension of the DEPB scheme, Mr. Patel said: “We have already taken it up and are going to be in further talks with Department of Revenue.”

The Duty Entitlement Passbook (DEPB) scheme, providing incentive to exporters, was extended by the government till September 30. Earlier, it was scheduled to expire on June 30.

He, however, said the continuation of the scheme was a question of larger policy framework of the government as it was not only restricted to the auto sector.

When asked about the disinvestment in ailing PSUs, Mr. Patel said, “We have only decided in-principle (for HMT Bearings). Of course, the government will take the decision at the Cabinet, but HMT Bearings is one of the companies which could be looked at.”

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