Vehicle makers disappointed

The proposal in the Union Budget to increase  tariff rate on commercial vehicles (CVs) from 10 per cent to 40 per cent has not gone down well with commercial vehicle manufacturers.

They said that the move was unexpected. Talking to Deccan Herald, Volvo India Managing Director Kamal Bali said: “The announcement and the overall lack of measures for the automotive industry is a dampener. The move to hike import customs duty is highly unexpected.”

Bali said that following the hike in import duties, an inadvertent increase in import costs of large companies would commence, which would cascade onto an already heavy accumulation of CENVAT, due to problems arising out of an inverted duty.

This should have been addressed well by the government, he said, adding that logistic costs, apart from costs of importing technology will also go up. Automotive occupies around 38 per cent of the total manufacturing sector, and is reeling under immense pressure.

“Manufacturing, a core agenda as part of the Make in India campaign, did not get much fillip in the Budget. The sector is already dogged with huge issues in terms of indirect taxes,” Bali said, however, adding that the Budget encourages booting infrastructure and restarting stalled projects.

The Budget said that investment in infrastructure will go up by Rs 70,000 crore, along with revitalisation of Public-Private Partnership model of the sector.

“Besides, constructing 1 lakh kilometres of new roads will have an impact on commercial vehicles which has had a negative growth,” KPMG India Partner (Infrastructure and Government Services) Jaijit Bhattacharya said in an email response.

“Increasing the tariff rate on commercial vehicles from 10 per cent to 40 per cent and effective rate from 10 per cent to 20 per cent can potentially be absorbed by truckers as the fuel costs have come down and the competing railways freight charges have gone up. However, in the long-run, this increase is detrimental to the efficiency in the Indian economy as truckers form an important part of the supply chain,” Bhattacharya said.

Meanwhile, Scania Commercial Vehicles India Managing Director Anders Grundstromer said in a release, “We at Scania feel overall, this is a balanced budget with emphasis on manufacturing as part of Make in India along with appropriate importance to skilling India.
While the increase in customs duty for commercial vehicles is disappointing , overall – the positives outweigh the negatives.”