SIAM says Union Budget is a tight rope walk under current circumstances

New Delhi, February 28, 2013: S Sandilya, president of apex industry body SIAM, has welcomed the Union Budget 2013-14. He said that that under the current economic environment, finance minister P Chidambaram has tried to balance the need for growth with fiscal compulsions. The announcement of investment allowance reintroduction is very positive. The focus on infrastructure is also a welcome move which will help growth of the economy. While there are several innovative proposals, the auto industry had expected that the finance minister would come out with more specific roadmap for implementation of the Goods & Services Tax (GST). The industry is keenly looking forward to full implementation of GST at the earliest, said Sandilya. The association has lauded the doubling of the allocation of funds (Rs 14,873 crore) under JNNURM scheme enabling a substantial part for purchase of up to 10,000 buses. It says the finance minister has accepted SIAM’s recommendation to lower excise duty on commercial vehicle chassis from 14 percent to 13 percent which was raised in Budget 2012-13 and led to significant drop in off-take of chassis by the body builders. However, the other recommendation to reduce the excise duty on passenger cars by 2 percent, which could have led to significant improvement in sales, has not been taken up.

Meanwhile, the minister has also accepted SIAM’s recommendation on extension of concession for import of electric and hybrid electric vehicle parts till March 31, 2015.

According to SIAM, the increase in customs duty for luxury cars (from 75 to 100 percent) and motorbikes (from 60 to 75 percent) seems to be an effort to raise more revenue and to encourage local manufacturing, value addition and employment. The proposal to increase duty on second-hand vehicle from 100 percent to 125 percent is right, says the association, conveying that India is not ready to accept second-hand vehicles from other countries.

The other area which the industry did not expect was the increase in excise duty on SUVs used as personal vehicles. This is the only segment in the industry which has been doing well this fiscal and increasing price of these vehicles will dampen sales and further impact market sentiment adversely.