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Updated: February 27, 2010 23:30 IST

Deduction on in-house R&D should continue

Special Correspondent
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Ravi Kant
Ravi Kant

The automobile industry is concerned about the fact that the Union Budget has announced a change in excise duty, increasing it by two percentage points and the price of petrol and diesel has also gone up by around Rs 2.5 per litre for the consumer. Ravi Kant, Vice Chairman, Tata Motors said these were among the challenges for the automobile industry in the Union Budget 2010-11. ``But there are also some positives and silver lining.” The substantial increase in tax exemption in terms of weighted deduction on in-house R&D to 200 per cent and outsourced R&D to 175 per cent was welcomed. ``It is welcome but it should continue at these levels for a few years at least.”

P.M.Telang, Managing Director – India Operations, Tata Motors said the 2 per cent hike in excise duties ``may not disturb the market economics. For us, the top-end Prima truck will go up by Rs 60-70,000 and for passenger cars, it will go up from around Rs 6000. As is always the case, we will pass on hikes or reduction in duties to the consumer.”

Rajeev Kapoor, President & CEO, Fiat India felt that although the lowering of Income Tax rates will allow higher disposable income to individuals, the effect of increase in excise duty would have an inflationary trend. ``The partial roll back of stimulus was expected. Increase in price of petrol and diesel will certainly hurt consumers.”

Karl Slym, President & Managing Director, General Motors India, felt that as far as the automotive industry is concerned, the budget did not meet the expectations as the sector is yet to recover fully. ``We were not expecting any hike in excise duty and imposition of some duty on petroleum products. The automotive industry is one of the growth drivers of the economy and as such continuation of the stimulus package for some more time would have helped the industry to regain the growth momentum.” However, he felt that some concessions given to environment-friendly mobility solutions were welcome decisions. ``We will evaluate the impact of the hike in excise duty and revise the price of our vehicles in line with the increase.”

Michael Boneham, President & Managing Director, Ford India, felt that the hike in excise duty on cars by 2 per cent was a major disappointment for the automobile industry as there was strong need to continue the stimulus to support the ongoing fragile recovery. ``This is sure to affect consumer sentiments when taken with the simultaneous hike in fuel prices as it will lead to an overall increase in motoring ownership.”

However, he felt that ``on the positive note with the government broadening the tax slabs would boost the disposable income in the hands of the middle class and is a positive sign creating a larger customer base for auto sector. Similarly allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore will be a boost to the industry. Overall though the budget has met the market expectations, it is not a game changer. The Auto sector will need a sustainable plan to witness a good business this year.”

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