Union Budget India 2013 Rs 14,883 crore for buses, increased import tax, SUV’s costlier

mercedes-benz-gl500-in-leh-offroadingUnion Finance Minister P Chidambaram has allocated Rs 14,883 crore for purchase of 10,000 buses. A financial boost to the commercial vehicle sector was much needed, and under the city modernisation scheme, the Jawaharlal Nehru National Urban Renewal Mission ( JNNURM) aid for budget 2013-14 is highly appreciated.

Being rich in India has it’s downside. Import duty on luxury cars and bikes have been increased for FY14. Import duty on fully built cars has been increased to 100% from the current 75%. Import of motorcycles above 800 cc will now be levied 75% tax from the current 60%. Porsche and Lamborghini import fully built cars into India, and the additional import tax will further burden them.

Excise duty remains stable at 12% for all passenger cars, though excise duty on Sports Utility Vehicles is increased by 3%, from 27% to 30%. SUV’s are being pulled up for utilizing additional parking space. SUVs registered as taxis are not levied the additional tax. Luckily the utility vehicle war has not been dissected based on petrol and diesel differences. Subsidy benefits for electric vehicles are being extended till FY-15. There is also a ‘Nirbhaya Fund’ of Rs 1,000 crore for safety and empowerment of women.

Michael Perschke, Head, Audi India had this to say, “Increase in Custom Duty for imported cars and Excise Duty on SUVs is very surprising. It will severely impact the auto industry and its growth. We will have to seriously evaluate the impact of this hike on our prices and, have no choice other than to pass on the increase to the customer. Overall it will have an adverse impact on automobile industry which is already going through a slowdown and specifically affect demand including that of SUVs.”

“Currently, the industry is facing pressure from a number of factors like increasing fuel prices, high input costs, persistent inflation, high interest rates; the increase in excise and customs duty will be a dampener. The government should have looked at extending support to auto industry, which has been contributing, significantly to the GDP and could have formed a strategic pillar of industrial development.”

“We are happy to note that there is a renewed focus on infrastructure especially roads. The proposed regulatory authority on road construction will hopefully fuel better infrastructure and speed up developments.”

Mr Takayuki Ishida, MD & CEO, Nissan Motor India had this to say, “There is no significant or drastic change in the budget this year. The 2013 budget is a “budget in motion” as it continues to focus on growth in predominantly primary sectors like agriculture, infrastructure and education. This growth will in turn support the growth in other sectors including the automobile industry.”

“We are very happy about the investment allowance of 15% for investments above Rs 100 Cr as a tax incentive. We stand to benefit from this as we have plans to expand our operations in India.”

“We are also happy about the Chennai – Bengaluru Industrial Corridor to be developed jointly by the Department of Industrial Policy and Promotion (DIPP) and the Japan International Cooperation Agency (JICA). This industrial corridor will play an important role in terms of logistics infrastructure for companies like ours which are present in the said region.”

“The excise hike for SUV will not have a drastic impact; it is most likely to distinguish the price barometer between sedans and SUVs even more clearly than ever before.”

Joginder Singh, president and managing director, Ford India had this to say about the Union Budget 2013-14, “We welcome the focus on infrastructure development, social benefits for inclusive and sustainable growth in the country. The investment allowance to boost the manufacturing sector is a positive move. The automobile industry is a significant contributor to India’s economy and future growth potential. We are disappointed that there is very little in the budget that will help boost consumer confidence and revive growth. It is a missed opportunity to introduce measures that would have revived industrial growth significantly. As we all know the automotive industry has been going through very challenging times, we are disappointed with the increase in the excise duty for SUVs.”

Lowell Paddock, President & Managing Director General Motors India had this to say, “The budget is encouraging due to its focus on agriculture, irrigation, education, skill development, health care and infrastructure. Since it addresses some of the concerns of the industry in general, it should help economic growth going forward.”

“As far as the automotive industry is concerned, the budget did not meet the expectations. We were expecting the roll back of the excise duty imposed last year. Instead there is an increase of 3 per cent excise duty on SUVs and there is also a hike in customs duty of 25% on high end imported vehicles. These hikes are not on the expected lines and will impact the sale of SUVs. Having said this, we have to see the fine print to understand the clear definition of SUVs. The automotive industry is one of the growth drivers of the economy with its backward and forward linkages to generate multiple and substantial employment opportunities any duty concessions would have helped the industry to register some growth as the industry has already started slowing down due to high interest rates, fuel prices, commodity prices, negative market sentiments etc. Some concessions announced for electric vehicles and increased allocation for the road transport sector are welcome decisions.

“Some of the other announcements made by the finance minister for manufacturing, R&D activities, regulatory authority to monitor road projects, focus on skill development etc should enhance the competitiveness of the Indian industry. The intention to further promote the development of infrastructure, particularly in rural areas, is a positive step. The government’s commitment to continue with its reform process is likewise a positive step.”

“Similarly, the investment and demand stimulating measures in manufacturing especially the investment allowance for two years, purchase of buses under JNNURM, movement on GST and some positive action on industrial corridors are also welcome decisions. These proposals, if implemented effectively, should have a positive impact on industry and the economy as a whole. The challenge now is the implementation of the proposals. Our hope is that the market will respond favorably.”

Uttam Bose, Managing Director, Hindustan Motors Ltd., had this to say about the Union budget, “The auto industry has been the worst affected by the ongoing economic slowdown. The current fiscal has registered virtually no growth in the car segment. No wonder, hike in excise duty on SUVs from 27 % to 30 % has come as an unexpected blow. The last budget too had witnessed excise on SUVs going up from 22 % to 27 %. The auto industry was expecting reduction in excise across all vehicle segments to combat the current crisis. The 10-year Auto Mission Plan has also been talking of a favourable excise regime for the industry. Notably, cut in excise duty from 12 % to 8 % had helped the auto industry in somehow bearing the brunt of the 2009 downturn. Nothing of the kind has happened this time. Thankfully, the excise hike is limited to SUVs.”

“The finance minister has, however, given hope to the auto industry by allocating Rs. 14,873 crore to Jawaharlal Nehru National Urban Renewal Mission (JNNURM) which will lead to growth in public transport. Companies in the commercial passenger vehicle segment should benefit. The move is also in line with the socio-economic reality of the country. One hopes that the finance minister will offer some incentives specially for smaller automobiles, which form the bulk of total auto sales, before the budget is eventually passed. The auto industry is amongst the biggest employers and tax payers. It cannot be allowed to languish for long.”

Suvajit Karmakar, CEO, ALD Automotive Private Ltd, a Société Générale Group company, had this to say on the impact of Union Budget 2013-14. “We are happy to hear that the Service tax has not been increased thus not effecting our pricing negatively. However we are awaiting to see the impact of increase in excise duty on SUV as these are one of the most commonly leased vehicles… it is surely not a very good news especially when this segment was contributing significantly to the leasing fleet. We were expecting to hear more on the roadmap for implementation of GST. Overall we feel it’s an average budget.”

Mr. Vipin Sondhi, MD & CEO, JCB India Ltd. had this to say about the National Budget 2013, “The Finance Minister has rolled out a well-balanced and realistic budget. He has taken steps which will help him deliver on his promise to contain the fiscal deficit to 4.8% for 2013-14, though the maths is still to be seen. Emphasis on Infrastructure sector viz credit enhancement by IIFCL, PMGSY and award of 3000 km road projects, building of new ports at Sagar and one in Tamil Nadu, focus on a Chennai-Bangalore and Mumbai-Bangalore industrial corridor and introduction of Investment allowance should help revive the investment cycle in the country which would definitely add to growth. The key, however, lies in expediting the execution of infrastructure projects and we hope that Cabinet Committee on Investment (CCI) would help achieve this objective.”

Rohit Saboo, President & CEO, NBC had this to say on the budget for auto sector.” The industry was expecting a big push to bring it out of the downturn. There has been no support from the Govt. on the auto segment, instead there is an increase in the excise of the SUV which was the only sector in the Auto space doing well. Now this will also be under pressure.”

Babu Rao, President, Association of Indian Forging Industry (AIFI) had this to say, “The Budget proposals of the Finance Minister for 2013-14 do not seem to address the slow-down in the manufacturing industry more specifically the Auto-sector on which the Forging Industry depends to a large extent. The investment allowance of 15% announced by the Finance Minister will help only the larger industries with outlays of over Rs. 100 Crores. The majority of the members of the AIFI who are SMEs will not be able to avail of this. The Finance Minister should reconsider and extend it to the entire industry to give the much needed stimulus to manufacturing.”

“The welcome measures for the SME Sector are the increase in SIDBI Fund from Rs. 5,000 Crore to Rs. 10,000 Crore and the Rs. 500 Crores credit guarantee scheme besides sops for loans up to Rs. 25 Lakhs.”

“He has also set apart Rs. 1000 Crores for rewarding candidates who get skilled and duly certified.”

“Another positive move was the proposal to shift oil exploration projects to revenue-sharing from the existing profit-sharing scheme – a welcome measure to control gas and oil prices. This should be extended to mining of all minerals and ores also.”

“Setting up of special funds for urban housing, PSU Bank capitalisation and Women’s Bank and Protection Fund and Green Energy Fund are welcome measures.”

“Substantial increase (16%) in outlay on education and increased outlays on science and technology, space science and R&D besides aerospace sectors are most welcome.”

J. V. Adhia, Vice President, Finance, Atul Auto Ltd had this to say about Budget 2013, “The Budget is neutral to the Auto Industry especially the three wheelers. Putting excise duty on the SUV’s was a different move and unexpected. There is nothing to benefit the common man in the entire budget.

Tax on goods, SUV, Jewellery, dining out, mobile phones etc… is surely going to affect the common man. A focus on women’s development is a good step but is there a real need of introducing a women’s bank? The Finance Minister has put a good step forward by putting the tax exemption for the first time house buyers with loan under 25 lakhs. Moreover, a lot of budget has been increased for the Healthcare in India which is a good step, provided the plans reach the desired audience successfully. The Infrastructure projects have also got a good benefit with the tax free bonds; now we expect a change in the infrastructure in India too. With the budget we doubt if the fiscal deficit will really be reduced by 4.8%. A lot of plans introduced by the Finance Minister are similar to the last year’s, but overall a neutral budget.”

Sandeep Singh, Deputy Managing Director and Chief Operating Officer, Marketing and Commercial said “The market continues to remain sluggish and the with the additional excise duty levied on SUV and UV, the market will be further impacted ”.