Car makers want excise disparity to go; cheaper loans

New Delhi, Feb 22 (UNI) The auto industry, which has been reeling under a slowdown of sales, is crying for excise relief in the Budget 2008-09 and has sought Finance Minister P Chidambaram's intervention in making loans both cheaper and easier.

Industry leaders while commending the efforts of Mr Chidambaram to bring down the transaction cost and liberalise the flow of credit to consumer durables and non-durables, wanted a further cut in interest rates to get them out of an impending recession.

The credit squeeze was hitting hard the auto sector and the lowering of interest rates by premier financial institutions like State Bank of India and Canara Bank was not sufficient, they said.

The lamented that the Reserve Bank of India in its review of the credit policy had left the prime lending rate (PLR) unchanged.

Some banks, however, seeing the clouds on the horizon with which the industry is confronted, brought down lending rates.

Auto majors wanted excise duty differential to me eliminated in the budget.

Saying that the cost of credit verification was phenomenally high, they suggested that the credit verification bureau should be operationalised as early as possible.

''Reduction or making excise duty uniform is a must. We also look at some intention of a reduction in Central Sales Tax (CST) and rolling out Goods and Services Tax (GST),'' said Society of Indian Automobile Manufacturers (SIAM) Director General Dilip Chenoy.

Two years ago, the Finance Minister had cut the excise tax on small cars by a third to 16 per cent while for larger cars it remained at 24 per cent.

Mr Chenoy, however, added that on the taxation front the industry did not see much possibility of concerns being addressed. ''The excise duty structure is not clear, we are not sure if the government will do anything now or wait towards implementing GST.'' Similar views were echoed by GM India Vice-President P Balendran, as he called for a reduction in excise duty and early introduction of GST and phasing out CST.

''We want a uniform policy in excise tax. We do not agree the differential tax structure. Let customers decide the product they want to buy,'' said Ford India VP Sales Marketing Scott McCormack.

In January this year, the two-wheeler sales continue to slip with sales of 605,455 units compared to 680,014 in the same month last year, which is an 11 per cent decrease. Though car Sales in January increased by 8.99 per cent to 113,899 units, it was helped maily because of Hyundai's i10 sales.

''This budget will determine the course of economic activity for the next 18 month since we have election next year. Some action to address the two wheeler segment has to be taken in this year's budget,'' Mr Chenoy said.

The problem of two wheeler industry stems from the availability of finance which was held up due to the high cost of credit verification for giving out loans to young people for the first time.

''However, with the framework for credit information bureau in place the banks ability to gain information on potential loan seekers will dramatically increase...not immediately since you still have to set up the bureau. This is a long time solution for the sector'' Mr Chenoy said High cost of credit also affected the sector. While on one hand there is some move on banks reducing interest rates the rate is still too high. Since its not easy to provide credit subsidies, it can be offset by lowering excise duties, he added.

Mr Chenoy said the industry would like to have an eight per cent reduction in the excise duty on buses as a measure to improve public transportation in the country and tax cuts for import of hybrid vehicles.

''For buses and urban transportation they may be linked with a state action under the Jawahar Lal Nehru Urban Renewal Mission. There should also be an increased spending on infrastructure,'' Mr Chenoy said.

India 's manufacture of 7.9 million vehicles, including 1.3 million passenger cars, amounted to 7 per cent and 2.4 cent respectively, of global production in number. Auto components manufacturing sector is another key player in Indian automotive industry.

Exports from India in this sector rose from one billion dollars in 2003-04 to 1.8 billion dollars in 2005-06, contributing one per cent to the world trade in auto-components. In India , automobile industry provides direct employment to about five lakh people. It contributes 4.7 per cent to India's GDP and 19 per cent to India's indirect tax revenue.

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