Praful Patel pitches for stimulus for Indian automobile industry

New Delhi, September 4, 2013: Speaking at the 53rd annual convention of the Society of Indian Automobile Manufacturers (SIAM) in New Delhi, Praful Patel, minister of Heavy Industries and Public Enterprises, made a pitch for the automobile sector which is experiencing tough times amidst an overall slowdown in the market.

He said the Ministry of Heavy Industries has been in talks with the Finance Ministry for the past few months to provide support to the auto industry. Calling the ongoing downturn “challenging”, Patel said that he is willing to take along a delegation of the automobile industry, comprising SIAM and other stakeholders, to prime minister Manmohan Singh and finance minister P Chidambaram to discuss the possibility of offering a stimulus package for the sector. "There is genuinely a case for stimulus for the auto sector," said Patel.

The minister’s comment would be soothing for the industry, which is eagerly looking for government intervention and the oncoming festive season to improve its fortunes. SIAM, the apex industry body, has also been considering talking to the government for a package similar to the one given during the 2008-09 downturn, in which excise duty on two-wheelers, small cars and commercial vehicles was reduced to 8 percent.

According to S Sandilya, president, SIAM, “"Slow economic growth, high interest rates and fuel prices and high inflation are all affecting consumer sentiments. The government needs to have a relook and bring a stimulus package for the auto industry which will help in achieving higher growth.” He added that last year the industry has committed investment of Rs 22,000 crore towards developing additional capacity.

The auto industry, which is one of the largest employers in the country, contributes to 6 percent of the GDP and recorded a vehicle sales turnover of Rs 264,000 crore in FY’12 (Rs 232,000 crore domestic sales and Rs 32,000 crore export sales).

As of July 2013, as per SIAM vehicle sales data, all vehicle categories have posted declines. Domestic passenger car sales fell 7.40 percent to 131,163 units, for a record nine months in a row, and the once-popular Utility Vehicle category fell 17.53 percent in July to 37,010 units. While M&HCVs were down by nearly 20 percent, LCV sales have fallen by 15 percent. Three-wheeler sales were also down by 6.14 percent with two-wheeler sales remaining flat. Vehicle sales across all categories dropped 2.08 percent to 14,15,102 units in July 2013 from 14,45,112 units in July 2012.

Even the recently released August sales figures reflect plodding sales. Other than Maruti Suzuki, Hyundai Motor India and Honda Cars India, most carmakers have posted double-digit sales declines in August 2013. High interest rates, constantly rising fuel prices and an overall slowdown in the economy have been keeping potential buyers away from showrooms. The two-wheeler sector too has reported flat sales.

SUMANTRA BAROOAH