Financial Daily from THE HINDU group of publications
Saturday, Mar 01, 2003
Industry & Economy
Smooth road ahead for car companies
CHENNAI, Feb. 28
THE auto industry, which had lobbied hard for a reduction in excise duty, is quite pleased with the excise duty cut announced in the Budget, although it was hoping that reduction would have been more.
Car manufacturers wanted the Government to cut excise duty to 16 per cent, the same level as that levied on motorcycles. Their argument was that both cars and motorcycles catered to the mobility needs of the people and hence there should not be any difference in excise between the two.
The excise duty for cars was brought down from 32 per cent to 24 per cent, which at the retail end translates into a 5.5-6 per cent cut.
Most car manufacturers have announced a drop in prices across all models in their stable.
However, with a one per cent National Calamity Duty on cars, multi-utility vehicles and two-wheelers, the actual benefit of the excise duty reduction would be seven per cent, manufacturers said.
Automobile manufacturers in the country have been repeatedly pointing out that the various taxes and levies account for as much as 67 per cent of the sticker price of a car. Such a level of taxation is among the highest in the world, according to them.
As per Mr R. Seshasayee, Managing Director, Ashok Leyland Ltd, measured in terms of comparable monthly salaries, acquisition cost of comparable cars in India is one of the highest in the world.
The excise duty reduction on cars is a welcome correction that can also spur growth in allied sectors.
Equally welcome, according to him, is the proposal to bridge the gap in excise duty for bus and truck body-building by integrated vehicle manufacturers and independent body builders.
``I only thought that the FM could have incentivised R&D investments in auto sector,'' Mr Seshasayee, who is also President of the Society of Indian Automobile Manufacturers, said.
Mr Vinay Piparsania, Vice President-External Affairs, Ford India Ltd, said the move was a progressive decision to focus on the manufacturing side. The ex-showroom price of the Ford Ikon will come down by Rs 23,000 to Rs 30,000 depending upon the models, he said.
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