Govt announces measure to boost auto sector

The Finance Minister on Friday announced a slew of measures to boost the auto sector, but to the dismay to auto companies in India, gave a miss to any kind of rate cut on the passenger cars.

Among the top of the announcement, the FM Nirmala Sitharaman said that the proposed hike in the registration of vehicle has been postponed till June 2020.

The Ministry of Road Transport and Highways had issued a draft notification on July 26 proposing up to 20 fold increase in registration charges. The draft proposed that new medium good/passenger vehicles would be registered for Rs 20,000 instead of the current Rs 1,000, while new truck or buses would be charged Rs 20,000 instead of Rs 1,500.

Yet another measure announced by the government in the sector was to release the pending GST within 30 days, which will serve as major booster to the automobile dealers who have been suffering the most.

The government has also decided to increase the depreciation to 30% on all vehicles acquired till March 31, 2020, owing to the stock build-up amid falling sales.

"Because inventories are stocking up and piling up in the car manufacturing companies we decided to give an additional 15% to increase it to 30% on all vehicles acquired irrespective of the type during the period from now till March 2020," Nirmala said.

BS-IV vehicles purchased upto March 2020 will remain operational for their entire period of registration, she clarified.

In another major boost to the sector, the minister has also announced “a vehicle scrappage policy will be coming soon,” she said.

She further said that both electric vehicles and internal combustion engine vehicles will continue to be registered. "The govt focus will be in setting up infrastructure for the auto ancilliary and components including batteries for export. But both EVs and ICE will continue to be registered," Nirmala said.

To boost demand government will consider various measures including rolling out of scrappage policy. "Since we need to create the necessary infrastructure for dealing with scrapped vehicles we are holding on but we shall hopefully come with a scrappage policy sooner so that road unworthy vehicles can all be sent to be completely scrapped and the money of scrapped vehicles to be obtained in the form of coupons with which the new vehicles will be bought," she said.

She, however, didn’t mention any change in the taxes over the passenger cars in India. The industry, which sees its products taxed in the range of 25%-50% has been demanding cut in the “exorbitant rates.”

“For Auto, there were three broad reasons for a slowdown – poor sentiment, availability of finance and transaction cost for buying vehicles… Not much for reducing transaction cost but several other measures that will incentivise vehicle purchase and also remove some of the unfounded fears such as BSIV vehicle registration,” said Pawan Goenka, MD of auto-maker Mahindra & Mahindra.