FY2016-17 Union Budget looks to encourage rural economy by giving the rural, agricultural and infrastructure segment a boost. Consequently, consumer sentiment in rural India will benefit, and a positive outlook will thereby help automobile industry performance.
Road sector and Pradhan Mantri Gram Sadak Yojana (PMGSY) under the Ministry of Rural Development, Government of India investment outlay is Rs 97,000 crore with focus on development of national highways, rural roads, and other roads. 85 percent of interrupted projects are re-initiated by Ministry of Road, Transport and Highways help.
Better infra will positively affect auto industry. industry. Motor Vehicles Act amendment opens up road transport sector in the passenger segment. Service Tax on passenger transport is a downer.
A Rs 200 crore grant is made to FAME scheme and NATRiP. Validity period of exemption for specified goods used to manufacture electrically operated vehicles and hybrid vehicles is now extended without time limit. This could improve market sentiment around EV’s and fuel faster adoption of such vehicles.
SIAM welcomes clarification in regards mode of payment of NCCD from cenvat for last fiscal. Basic custom duty on raw material for catalytic converter manufacturing is down to 5 percent from 7.5 percent. Basic customs duty on aluminium and aluminium product, and zinc alloy imports stands increased and will impact the industry. Weighted tax deduction on R&D expense is down to 150 per cent from 200 percent wef April 01, 2017. This will be reduced further to 100 per cent from April 01, 2020. This is favourable to indigenous R&D. It’s a standalone tax benefit reduction announcement as of now, as no corresponding corporate tax rate reduction is announced.
SIAM anticipated some development in fleet modernization, but that wasn’t broached. Additional 1 percent tax is to be levied at source car purchases exceeding value of Rs 10 lakhs. This works as a deterrent. Infrastructure cess of 1 percent on small petrol, LPG, CNG cars, 2.5 percent on small diesel cars (less than 1500cc) and 4 percent on higher engine capacity vehicles and SUVs is levied with immediate effect. The resultant car price hike across segments would hurt the industry. Introduction of new taxes on vehicles mellows the auto sector.
Sohinder Gill, Director, Corporate Affairs, Society of Manufacturers of Electric Vehicles (SMEV) says a long term vision to promote green mobility solutions remains absent. Promotion of E-vehicles is not very visible in the budget announcement.
Clarity in regards to fund allocation for promotion of E-vehicles or specific budget support for green vehicle infrastructure creation for FY2016-17 is missing.
Concession on electric vehicle taxation continues. Nil BCD and 6 percent excise/CVD regime on electric vehicle and hybrid vehicle parts continues beyond 31st March. Customs and excise duty concessions on specified parts of electric vehicles / hybrid vehicles have also been extended. Exempting electrically operated vehicles, hybrid vehicles and hydrogen vehicles from infrastructure cess is a positive step.
Government’s policy to dis-incentivize fossil fuel based vehicles with higher taxes supports the thrust green and clean transport solutions need. Infrastructure build up and ground level regulatory facilitations need to come into being to promote green vehicle use. E-vehicle charging stations at convenient locations isn’t a norm in cities. Government should announce long-term commitment to NEMMP policy so industry can plan strategies and investments in accordance.
Vikram Kirloskar, Vice Chairman, Toyota Kirloskar Motor says today’s Union Budget announcement gives the Indian economy midterm and long term direction. Proposed doubling farmers income by 2022 will contribute significantly to the economy. Extra green tax on cars is an area of concern, as auto industry recovery could be compacted. Meeting accelerated safety and emission regulations imposes a financial commitment, and any additional tax is a burden. Green tax should be used to incentivize scrapping of BS 1 and BS 2 vehicles and encourage sales of alternate fuel technology vehicles that are environmental friendly.
Shekar Viswanathan, Vice Chairman and Whole, Time Director, Toyota Kirloskar Motor says policy to promote alternate fuel technologies would help the environment. He opines the government shouldn’t concentrate all focus on vehicle size as this isn’t a technology determinator.
Nigel Harris, Managing Director and President, Ford India says Union budget for FY2016-17 lacks a roadmap for the automotive sector. The industry has contributed significantly to India’s economic growth. High level of discounts offered on purchases points to weak consumer demand. This budget has focused on levying added taxes which are further detrimental to auto industry sales and growth.
Sumit Sawhney, Country CEO & Managing Director, Renault India Operations says Union Budget 2016 addresses growth parameters while keeping fiscal deficit within the set limit of 3.5 percent and efforts to curb inflation for FY2016-17.
Measures announced can revive domestic demand. Budget is focused on infrastructure growth. Policies for automobile sector remained largely unchanged. Apart from boosting India’s performance as an automobile manufacturing hub, the industry was hopeful about industry-friendly policy decisions, but that isn’t the case.
A scrappage incentive scheme would be helpful to keep old cars off roads and would not impact the auto industry while positively benefitting environment, fuel consumption reduction and increased demand for greener and efficient vehicles. But this hasn’t been addressed either.
Excise duty reduction and detailing for GST implementation to support unified excise and taxation structure hasn’t been announced either.
Dr. Pawan Goenka, Executive Director, Mahindra & Mahindra said focus on PPP in infrastructure is a welcome move. He says upto 4 percent cess for passenger vehicles is a concern for auto industry. Additional revenue from cess could have been used to phase out older vehicles.
Stefan Palskog – President Scania India and Mikael Benje – Managing Director Scania India hoped there would be emphasis on biofuels made from local waste when one considers pollution levels and waste managemnet issues that plague cities. India also looks to substantially reduce dependency on fossil fuels.
No specific policy action or incentive is announced for biofuels-led sustainable transport solutions in the FY2016-17 Union Budget. Scania thinks this is essential for India’s quest of Smart Cities. Quick passage of Goods and Services Tax (GST) will bring in cost stability in the supply-value chain, increase fuel efficiency and quicken India’s journey in being a global manufacturing hub. Scania will continue its endeavour to improve the transport sector and will bring in global tech and manufacturing best practices to India.
Yadvinder Singh Guleria, Senior Vice President, Sales and Marketing, Honda Motorcycle and Scooter India Pvt. Ltd says after two consecutive weak monsoons, government’s focus on rural sector especially farmer welfare, education, interest subvention on existing loans and skill development would fortify rural economy. Allocation on road and highways improves overall connectivity and mobility led by rural areas. Once proposed measures are implemented, demand for two Wheelers in the rural market will benefit.
Pankaj Munjal, Chairman and Managing Director, Hero Cycles says the company is committed in advocating cleaner modes of transport and implementing pollution cess on vehicles is encouraging.
Dr. Wilfried Aulbur, Managing Partner and CEO, India, Chairman Middle East, Head Automotive Asia at Roland Berger says budget is muted for passenger vehicles. While added charges on purchase of luxury vehicles and high capacity SUVs may not dampen sales, they don’t support demand. Pollution cess on various car models works in the same way.
Joe King, Head, Audi India says Union Budget for FY2016-17 negatively impacts automobile industry. Excise duty reduction hasn’t been addressed. Instead an added infra cess has been added and this effects car price, and consequently demand. No positive initiatives have been announced to benefit auto industry which contributes majorly to manufacturing sector, and Indian economy. Approval of 10000 kms of National Highways is a positive development.
Roland Folger, Managing Director and CEO, Mercedes-Benz India says agrarian sector development is favourable for the Indian economy. Taxing luxury cars stunts industry growth. Expected reforms in duty structure would have infused growth and provided additional employment. Duty structure revision will level the playing field for all brands. While infrastructural development will positively effect the Indian aut industry in teh long run, short term growth drivers are missing.
