The Society of Indian Automobile Manufacturers (SIAM) has sought major concessions from the government to keep the small car momentum going. The SIAM move comes at a time when the line-up of small cars from international automobile manufacturers — Honda is coming with Jazz, Volkswagen readying its Up! and Toyota contemplating the IQ — is only getting longer.

Keeping in view the vast potential for small cars in India and the sluggish market growth in the two-wheeler and commercial vehicle segments, both of which have declined in the first six months of this fiscal, SIAM has requested introduction of a differential excise duty structure to boost demand in the automobile industry.

It has demanded a 10%-12% excise duty on small cars and changing its definitions to include all four-metre cars of up to 1,500 cc engine capacity. Currently, only 1,200 cc petrol and 1,500 cc diesel cars up to four metres length qualify as small cars.

SIAM has also clubbed multi-utility vehicles and trucks with small cars in the 10%-12% duty bracket due to their high commercial usage. All these categories currently face 16% duty.

SIAM wants two & three wheelers, along with buses to be taxed at 8% (down from the current 16%) while the duty on big cars to be reduced to 16% (from 24%) as they are a small number to the total cumulative sales and the reduction will not impact revenue collection.

A SIAM official said: "It will give a major fillip to the demand and the stagnating market. The high interest rates and decrease in the availability of finance have led to a decline in sales and may lead to a recession in the auto industry. These recommendations are also in line with the 10-year Auto Mission Plan, which envisages making the Indian automobile industry the most competitive in the world with low tariffs."

A senior official of the Ministry of Heavy Industries (MoHI) said that sales in all major segments except passenger cars have declined and the remedy is to reduce the cost of acquisition and minimise the cost of the car.

"The lack of demand is cause for concern for Rs 70,000 crore investment in the pipeline in the auto sector. Many small cars are being developed specifically for India and any new recommendations will be made to get latest technology at affordable prices."

"An energy-deficient country like India wants fuel-efficient cars with low cost of maintenance. While a lower tax structure will propel their induction in the domestic market and also increase manufacturing to make India a global hub for small cars," said a senior official of MoHI.

The government had reduced excise duty on small cars from 24% to 16% two years ago. The lowering of price had increased their demand and currently, over 80% of the total passenger vehicles sold in India are small cars.

The MoHI along with the ministry of finance also plans to study the impact on revenue collections due to excise cuts on small cars in the past before the final recommendations are made for the next budget.

Mr. Rakesh Joshi

Joshi Enterprise

Manager, Joshi Enterprise
Dispur, India

Free Member, Joined :02/02/2007
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