The automotive sector has got among the least of all the sectors in this year's budget. A marginal reduction of the extra cess on large cars, and a cut in duty on petrol-driven trucks, has failed to excite the industry, which was expecting more.
The sector now has to be content with the fact that the existing tax regime has not been unduly tampered with. The government will maintain the overall rate structure for customs and central excise duties as well as service tax, finance minister Pranab Mukherjee said in his budget speech on Monday.
The Rs5,000 reduction in additional cess charged on big cars amounts to only a small fraction of the total cost, and is not going to have buyers rushing to showrooms.
The duty reduction on petrol-driven trucks from 20 per cent to 8 per cent is also little more than a token gesture, as such trucks are a rarity on Indian roads.
"The only good thing is the government has not taken anything back that was given earlier," said Vishnu Mathur, executive director at the Automotive Component Manufacturers' Association. Arvind Saxena, senior vice-president (sales & marketing) at Hyundai Motors, agreed, "No change in excise duty is welcome for domestic demand."
Auto parts makers had demanded a reduction in duty on raw materials as well as an increase in customs duty on finished components. Tyre makers had sought a reduction in customs duty on natural rubber, as the duty now charged on it is double the price of the finished product.
Auto makers, on their part, had demanded export incentives, as more and more auto makers seek to make India a production base. But none of these fairly valid concerns was addressed by the finance minister.
The government's focus on rural spending and infrastructure could benefit the auto industry in the medium to long term. Incentives given to farmers may also boost sales of tractors. But even here, there are no specific proposals to boost farm mechanisation.