Budget disappoints auto industry

28 February 2007

New Delhi: While some corporate corporate heads and analysts described it as a non-event others were more vocal in saying and finance minister P Chidambaram''s Budget of 2007-08 as very disappointing.

The notable aspect about the current budget is regarding the number of sectors it neglected to touch.

For starters the auto industry an engine of growth in India in the past five years has not received direct mention. The mildly positive news concerning automobiles is the cut in tariff on petroleum and diesel from 8 per cent to 6 per cent.

The government has announced indirect benefits in education and training of the workforce and extension of the benefit of 150 per cent weighted deduction on in-house R&D by another five years. The industry incidentally had demanded a 10-year extension.

Another indirect benefit to the auto is in provision for the national highway development programme.

The industry had expected excise duty on larger passenger vehicles to be cut to 16 per cent from 24 per cent and customs duty on auto parts would be cut to 5 per cent from 12.5 per cent.
Not surprisingly the shares in Indian auto companies fell after the release of the Budget 2007 along with the rest of the market.

The auto sector index was down 2.5 per cent. Shares of Tata Motors were down 4.5 per cent at Rs 785, Maruti Udyog was down 5.3 per cent to Rs 841, Mahindra & Mahindra dropped 3.5 per cent to Rs 819.90 and components maker Amtek Auto was down more than 3.0 per cent at Rs 373.25 at the close of the market today.