NEW DELHI: Facing one of the worst slowdowns that has resulted in massive job losses, honchos of India’s automobile industry on Wednesday demanded a stimulus package from the Centre, as well as reduction of Goods and Services Tax (GST) rates on vehicles, to help revive demand.
Industry members, including Maruti Suzuki chairman RC Bhargava and Mahindra & Mahindra president Rajan Wadhera who also heads automobile lobby SIAM, met Union Finance Minister Nirmala Sitharaman.
“What we really need from the Centre is the reduction of GST rates from 28 per cent to 18 per cent, for revival of demand. We have been talking to the government on this,” Wadhera said after the meeting.
Officials said the finance minister has promised to look into the situation.
She also pointed out that the RBI has cut interest rates on Wednesday, which is likely to help the sector. However, they said, the government is unlikely to agree to reduce GST on the sector. Sources in the revenue department said that given the current revenue trends, it is difficult to agree to any major tax cuts.
Carmakers also sought cheaper finance for the automobile industry — for dealers, manufactures as well as consumers — to beat the current downturn. They also sought introduction of an incentive-based scrappage policy, which would help phase out old vehicles instead of the government’s plan to raise registration fee for older vehicles.
Wadhera said the sector needs immediate measures to reduce cost. “We told the government that banks should be directed to pass on repo rate cuts to the market and not reduce lending in the segment, especially to people who are following healthy financial practices,” he said.
Non-Banking Financial Companies, which used to finance 55-60 per cent of commercial vehicles and 30 per cent of passenger cars, are in a dire state, while lenders such as the State Bank of India are said to have reduced their exposure to the sector.
A prolonged economic slowdown raising fears of future cash flow among buyers, tightening of credit rules by financial institutions and poor monsoon have dampened demand in the sector, with passenger vehicle sales in Q1FY20 registering its steepest fall in nearly two decades by over 18 per cent.
This has forced carmakers and component manufacturers to cut down production days, resulting in job losses to temporary workers. Nearly 300 dealer showrooms have also been closed due to poor sales. Federation of Automobile Dealers Associations has stated that nearly 2 lakh jobs have been cut in the last three months due to the slowdown.