Tuesday, February 02, 2021
By Manoj Kumawat
Union Budget Receives Warm Welcome By Auto Industry
After railways, the India auto industry plays an incredible role in strengthening the country’s overall GDP. Unfortunately, despite the new launches the industry had not been able to enjoy the expected success during the last couple of years. With this, the arrival of the global pandemic COVID-19 was like adding petrol to the fire. In all these circumstances the industry had hope of some relaxations and new beneficial announcements from the honourable Minister of Finance N Sitharaman in the recently presented Union Budget. Interestingly with the announcement of the voluntary scrappage policy for the old and unfit vehicles, increasing custom duty for auto parts, and improving the highway infrastructure within the country, has brought a smile on the faces of the key-leaders in the auto industry.
Some of the comments made by the industry experts on the Union Budget are mentioned below:
In the words of Mr Guenter Butschek, CEO & MD, Tata Motors, "Budget 2021 is a progressive statement of intent and action that aims to both stimulate and sustain growth following an unprecedented year. The significant increase in overall allocation towards capital expenditure has been complemented with comprehensive measures to catalyse multiple levers - focus on rural, infrastructure investment, an impetus to manufacturing, social welfare, entrepreneurship and digital - to enable overall holistic development. For the automobile sector, which is a significant contributor to India's GDP, there are multiple welcome announcements including a voluntary vehicle scrapping policy to phase out old and unfit vehicles, augmenting public transport system in urban areas, continuing focus on adoption of cleaner fuels, and enhancing outlays for developing road infrastructure and expanding the Swachh Bharat Mission."
According to Mr Gurpratap Boparai, Managing Director, Skoda Auto Volkswagen India Private Limited, "The union budget for 2021-22 presented by Honorable Finance Minister Smt. Nirmala Sitharaman, augers well to create capacity for development and growth in the country. Increased outlays in the road sector, infrastructure development and introduction of the voluntary vehicle scrappage policy will not only create a safer and environment-friendly auto sector but also drive replacement demand in the sector. The support announced for the rural economy and farm sector will be a big boost for wealth creation in the non-urban markets and increase the scope for auto demand in these regions. While further details of the prior announced PLI scheme is awaited, the same is expected to help the Indian auto industry to improve production efficiency and become self-reliant - "atmanirbhar'. It is important to keep in mind that even in the coming financial year, the passenger vehicle market is unlikely to reach the level of 2018 and the much-required rationalisation of GST and cess to aid the auto industry was missing. Additionally, the increase in customs duty on certain auto parts to 15% will further increase input costs and prices for cars which depend on specialised components which cannot be manufactured locally due to unviable volumes."
According to Dr Pawan Goenka, Managing Director & CEO, Mahindra & Mahindra Ltd, "This is a Budget with the head and the heart at the right place. As the industry was looking forward to, this is a growth-oriented Budget, with significant focus on healthcare and infrastructure, two areas where everybody wanted to see a lot of focus. I am glad that the scrappage policy has been acknowledged in the Budget and expecting the policy to be announced very soon. Though details are not yet out, when the policy comes out, it should have a full incentive for scrapping and not just disincentivize for not scrapping. If I look at the tractor industry there is a lot of incentive on the Agri economy and other agri-businesses.”