Alot is at stake for the crisis-hit auto sector as far as the upcoming union budget is concerned. The industry is pinning its hopes on finance minister Nirmala Sitharaman to hit right chords on February 1, resulting in a much-needed boost to consumer sentiment. While the sector expects the government to come out with policies that would hasten economic growth at large, the auto sector specifically wants the government to announce the much-awaited vehicle scrappage policy and bring down GST rates.
“We have urged the Finance Ministry to consider announcing an incentive-based Scrappage Policy and also increase budget allocation for ICE bus procurement by state transport undertakings. Increased cost of BS-VI may effect demand, hence we have also requested Government to reduce GST rates for BS-VI vehicles effective April 1 from 28 per cent to 18 per cent,” Rajan Wadhera, president, Society of Indian Automobile Manufacturers (SIAM) said.
With India moving away from the BS-IV emission norms to BS-VI standards from April 1, 2020, the prices of passenger vehicles are expected to go up by 3-7 per cent. This, according to experts, will have a significant impact on demand as a continuous increase in prices of automobiles over the past one and half years has been one of the biggest factors preventing buyers from making big-ticket purchases. The slowdown was so severe in 2019 that overall auto demand fell more than 13 per cent, the biggest recorded slump ever.
Component manufacturers, which have been one of the worst-hit sectors, also want the government to bring down tax rates. The Automotive Component Manufacturers Association (ACMA) on Monday reiterated the need for a uniform 18 per cent GST rate on all auto components in its recommendations.
Deepak Jain, president, ACMA said, “The automotive industry in India is undergoing a significant transformation due to new regulations and policy changes. On top of it the economic slowdown has deterred domestic consumption, we hope that the forthcoming budget will help uplift both the consumer and industry sentiments.”
Jain added, “We are hopeful that the government would consider our long-standing recommendation of 18 per cent GST on all auto components as also extend impetus to R&D and indigenous technology development.”
Other ACMA recommendations for the Budget include the launch of a Technology Development & Acquisition Fund, incentivising R&D spending and a tweaked definition of MSMEs. A new definition will allow more companies to avail government incentives, ACMA said. Meanwhile, Prashanth Doreswamy, Managing Director, Continental Automotive India said that such a policy is essential to realise the full potential of the BS-VI roll-out.
Scrappage policy will aid BS-VI roll-out
By offering a one-time incentive in the form of rebate in taxes for replacing vehicles older than 15 years, the government will help taking them off the roads. “Tightening and scrappage norms for vehicles can support demand creation,” pointed out Prashanth Doreswamy, Managing Director, Continental Automotive India.