Scrappage policy, the biggest takeaway for the automobile sector in the Union Budget 2021-22, has come in for all-round praise from industry stakeholders. Besides, they have also lauded the focus on infrastructure development and some indirect benefits offered by the recovery-oriented Budget, presented by the Finance Minister Mrs Nirmala Sitharaman in Parliament on February 1. Though its pre-Budget wish-list remains overlooked in many aspects, the automobile industry has given thumbs up to the overall thrust of the Budget.
The following are the edited versions of the automobile industry’s reactions to the Budget 2021:
President, SIAM, Mr Kenichi Ayukawa
“The Budget focusses on three broad themes –
· Remedy the current challenges post-COVID through focus on human health and asset reconstruction
· Give a major impetus to infrastructure with a five-year roadmap for fiscal consolidation
· Take bold measures for enhancing efficiency and competitiveness like privatisation, competition in power distribution companies, CGD expansion in 100 more districts and enablers like infrastructure financing.
A good macro-economic growth will translate to good demand for auto sector also.”
The announcement of major highway projects with sizeable increase in infrastructure outlay will help revive demand for both commercial vehicles and private vehicles. The allocation for procurement of 20,000 buses will directly benefit the industry. The addition of 100 new districts to the City Gas Distribution network for natural gas will help clean, efficient and affordable mobility for the country. While SIAM awaits the details of the vehicle scrappage scheme, it hopes and requests that fitness testing and certification should be much earlier and at frequent intervals to ensure safety, environment friendliness and fuel saving.
The reduction in customs duty on some steel grades, and revoking of countervailing duty and anti-dumping duty on certain steel products is a welcome step. Since platinum, palladium and rhodium are not available in India and are essential for emission control, their duty could have been made nil.
The increase in customs duty on auto parts/lithium ion cell parts is of concern and is likely to increase cost of manufacturing automobiles, wherever indigenisation is yet to happen.
Deepak Jain, President, ACMA
“Announcements with regards increased spend on road infrastructure, voluntary scrappage policy, Research & Development and PLI among others augur well for the automotive sector. Further, continued focus on building rural and agricultural infrastructure and prioritising agriculture credit growth will have long-term positive impact on rural demand for vehicles. Increase in basic customs duty on select auto components will encourage local manufacturing of such items. It is also heartening that the Budget outlay for the MSME sector has been doubled compared to last year. The auto component industry is dominated by MSME and this will provide them the necessary succour as the industry recovers.”
Mr. Vinkesh Gulati, President, FADA
“FADA is happy to note that the Finance Minister has finally announced the much-awaited scrappage policy, though voluntary to phase out old vehicles. If we take 1990 as base year, there are approximately 37L CVs and 52L PVs eligible for voluntarily scrappage. As an estimate, 10 pc of CV and 5 pc of PV may still be plying on road. We still need to see the fine prints to access the kind of incentives which will be on offer and thus have a positive effect on retail.
“While we expected disposable income for individuals to increase with enhancement of IT slabs and depreciation benefit on vehicles for individuals, the same has not been taken into consideration.”
Mr Sohinder Gill, Director General, SMEV
“We thank the Finance Minister for announcing the scrappage policy, which would help in encouraging the adoption of greener vehicles. Though we are awaiting more details on the policy, we hope that it would be designed in such a way that would automatically push the adoption of electric vehicles.
“For clean air, setting aside an amount of Rs 2,217 crore for 42 urban centres with a million-plus population is a good move. The fund could be utilized to spread awareness about the benefits of using e-vehicles to the environment and its contribution to make the air clean.
“The Government’s plan for strengthening the public transport sector under PPP models with an outlay of Rs 18000 crore for operating 20,000 buses is encouraging for the EV industry. The scheme could strengthen the EV industry if more number of e-buses could be supported through the scheme. We urge the Government to mandate procurement of e-buses under the scheme which would help us fight the issue of air pollution.”
Mr. Nikunj Sanghi, Chairman, ASDC
“The Union Budget 2021 has given due importance to skilling and education which is a welcome move in today’s skill-driven industry. The Government’s focus on supporting local manufacturing, skill development, and a heightened emphasis on job creation will lead to greater opportunities for the youth of the country. In addition to that, the partnership with the United Arab Emirates and Japan to promote industrial & vocational skills, techniques, and knowledge is a major boost for the sector.”
Dr. Waman Parkhi,
Partner, Indirect Tax, KPMG in India
“Finance Minister, while acknowledging immense potential for heavy capital equipment manufacture has also assured review of the customs duty structure for such goods. Customs duty rates on certain auto parts such as safety glass, electrical lighting and signaling equipment, windscreen wipers, etc. have been increased to 15 pc from the current rate of 7.5 pc/10 pc with an objective of promoting Indian manufacture of goods. PLI schemes for various manufacturing sectors will also positively support such manufacture. Voluntary vehicle scrapping policy besides contributing to lower emissions and improving safety on road would also generate demand for vehicles for the auto sector.”
Mr Guenter Butschek, CEO & MD, Tata Motors
“The 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, 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.”
Mr. Vikram Kirloskar
Vice-Chairman, Toyota Kirloskar Motor
“Faced with the challenge of delivering rapid, inclusive, economic growth with heightened focus on health and welfare in an environment of economic contraction and sharp increase in fiscal deficit due to COVID, the Finance Minister has struck a remarkable balance between growth and fiscal prudence by setting pragmatic revised targets and glide path for fiscal consolidation. From an auto industry perspective, the long-awaited voluntary scrapping policy can help take older vehicles off the roads thus contributing to lower fuel consumption, pollution as also generating additional demand for cleaner new vehicles. The auto sector welcomes this announcement and is hopeful that for realising full benefits there will be an early and full implementation of this policy.”
Mr. Gurpratap Boparai, MD, Skoda Auto Volkswagen India
“The Union Budget for 2021-22 augurs well to create capacity for developmental 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.
“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 per cent will further increase input costs and prices for cars which depend on specialised components which cannot be manufactured locally due to unviable volumes.”
Mr. Ashish Gupta, Brand Director,
Volkswagen Passenger Cars
“The Budget 2021 has the potential to revive the economy at large. The focus on the six pillars, with greater impetus on healthcare, infrastructural & connectivity development and rural economy will have a positive impact on the businesses. With respect to the auto sector, increase in custom duty on certain auto parts would impact the input cost, although we’re yet to assess the financial impact. On the voluntary scrappage policy, strict governance on the fitness test would determine the benefit on the environment and pollution reduction.”
Mr Chetan Maini, Chairman & Co-founder, SUN Mobility
“The Budget is focused on speeding up recovery post-COVID, while also providing solid direction to do so, over the next few years, which is excellent. When it comes to electric mobility, the main expectation was a firmer commitment from a policy standpoint by the Government for accelerating e-mobility and enabling charging and battery swapping infrastructure in the country for the same. One of the key measures for doing so would have been to fix the inverted duty structure for components such as batteries from 18 per cent to 5 per cent, and for charging/swapping infrastructure services from 18 pc to 5 pc as well. While this was not mentioned during the Budget, we look forward to the GST Council taking this up, and implementing it soon.
“The announcement of the outlay of INR 18,000 crores to support augmentation of public bus transportation services is a welcome announcement. Similarly, implementation of the scrappage policy is a good move, which can be further enhanced by providing additional incentive for replacing old vehicles with electric ones, instead of other ICE vehicles, for driving mass EV adoption.”
Dr. Raghupati Singhania, CMD, JK Tyre & Industries
“The Finance Minister has presented a ‘pro-growth’ Budget in these unprecedented times, which will give a boost to the Indian economy which is on path to recovery. Rightly, there is a huge emphasis on infrastructure, which will help revive economy as well as generate employment. Finally the much-awaited scrappage policy has been announced, which is a welcome step. This will increase sale of new vehicles and in turn boost tyre demand.”
Mr. Nishant Arya, Executive Director, JBM Group
“The allocation of Rs 18,000 crore for the public bus transport services has come as a sigh of relief for the bus-makers who have been caught in the doldrums from 2019. We, as an industry player, are now looking forward to the details of the vehicle scrappage scheme which will be an added advantage for the auto sector. The heavy and medium commercial vehicle sector will also have a boost in demand as a sum of Rs 5.54 trillion has been allocated for infrastructure development. The 2.5-5 per cent reduction in the customs duty on some of the semi-finished and finished steel products will have a positive impact on the automotive industry.”
Daimler India Commercial Vehicle
“The Government continues to focus on addressing the critical issue of rising pollution and on promoting infrastructural growth. DICV welcomes the Government’s decision of introducing the voluntary vehicle scrapping policy and the Budget allocation for the road projects. With the announcement of Infrastructure for roadways, we see even more demand for BharatBenz products in the construction tipper segment. Furthermore, the push towards increasing national highway corridors will help Improve inter-state connectivity; thereby creating a stimulus for fresh demand in urban transportation. An incentive based scrappage policy can accelerate the need for cleaner vehicles and will be more impactful for the environment.”
Mr Tarun Mehta, Co-founder & CEO, Ather Energy
“The voluntary vehicle scrappage policy announced to phase out old and unfit vehicles will encourage the sales of new vehicles. It is good to see that the Government is looking at addressing the concerns regarding GST inverted duty structure. We look forward to more details on the inverted duty structure and the Production-linked incentive (PLI) scheme announced by the Finance Minister.”
Mr. Harsh Didwania, Co-Founder & Director, EeVe India
“The Budget is very forward-looking one – the focus on infrastructure and spending will boost the job market and build confidence in the industry. It’s a step towards a robust economic reform agenda. The Budget, however, did not talk much on the automobile sector, specifically on EV. Raising custom duty will result in an increase in the cost of EVs.”
Mr Nagesh Basavanhalli
Group CEO & MD, Greaves Cotton Limited
“Long-term progressive Budget built on sound strategy for improving national health and economic recovery. The Government’s resolve to support manufacturing and infrastructure sector is commendable. The emphasis on government spending in building pan-India transport and allied infrastructure should have a positive impact in reviving consumer demand for vehicles. The allocation of a sizeable sum towards the PLI scheme will help the industry create jobs and boost economic growth. The recognition of the manufacturing sector as an integral part of the global supply chain and to grow the same in double digits, will be boost to the industry. While the auto sector would have liked to see more direct measures in the Budget, however the scrappage policy is certainly a step in the right direction for both ecology and economy.”