Can Union Budget 2013 help the auto sector get back lost ground?

Wednesday 20 February 2013, 12:14 PM by

Many factors have led to the downfall of the Indian market during the year 2012. However, with certain important provisions, the Union Budget 2013 could help this industry turn around. There have been problems galore, ranging from high interest rates on auto loans and upward spiralling petrol prices, along with delivery of vehicles from Honda to Indian customers that got delayed due to flash floods in Thailand. The last problem has now been solved by relocating component manufacture to Japan. A depreciating rupee, along with an ongoing global slowdown has also brought the Indian auto industry down on its knees.

As a step in the right direction, the government could implement a system of incentives for new vehicles that comply with emission standards, so that a strict adherence to controlled emissions can be ensured. Reduced taxes on CNG, LPG and hybrid vehicles could pave the way for the growth of alternately powered vehicles. Currently, Mahindra Reva is the only electric powered vehicle operating in India.

The auto industry also seeks a few changes in the existing excise duty regime. A structure as per the auto policy and the 10-year Auto Mission Plan (AMP) has been asked for by companies. Auto makers wish for a uniform Goods and Services Tax (GST) of 10 per cent across different segments of vehicles such as cars, two-wheelers and commercial vehicles.

For bigger passenger cars, excise duty differences with respect to small vehicles should be reduced. It would be ideal if uniform duty of 22 per cent could be levied on cars, irrespective of size and engine displacement, instead of the current 24-27 per cent. Industry experts believe that this may not be a very feasible idea as it would make vehicles more expensive, but other suggestions should certainly be looked at.