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HindustanTimes Thu,21 Aug 2014

Reduce duties on cars: Praful Patel writes to PM

Saubhadra Chatterji, Hindustan Times  New Delhi, September 20, 2013
First Published: 21:50 IST(20/9/2013) | Last Updated: 00:18 IST(21/9/2013)

Your dream car may become cheaper if the latest proposal from the heavy industries ministry to slash duties on vehicles is accepted by Prime Minister Manmohan Singh.
 
As the Centre grapples to revive the economy, heavy industries minister Praful Patel has suggested a host of measures to boost vehicle sales.
 
The proposals, if implemented, may result in price reductions ranging from Rs. 6,000 (in case of the Maruti Suzuki Alto) to as much as Rs. 2 lakh (Mercedes C class).
 
In a letter to the PM on Tuesday, Patel flagged the recent slump in auto sales, saying, “Considering the contribution this sector can have in the manufacturing GDP, in creating employment and in giving an overall boost to the manufacturing sector and the economy, I firmly believe you will respond favourably.”
 
According to Patel, the excise duty on small cars should be brought down from 12% to 10%.
 
In case of other vehicles for which the excise duty is 27%, it should be slashed by 3%.
 
SUVs and MUVs should also be subject to 24% excise duty, abolishing the special 30% slab for this category.
 
The domestic automotive industry has declined by nearly 10% in the first eight months this year.
 
Industry figures show 17,77,672 car units were sold from January to August this year, down from 19,75,170 in the same period last year — a fall of 10%.
 
Barely two years after it became the world’s fastest growing automobile market, India has quickly turned into the slowest among emerging markets such as China, Brazil, Indonesia, South Africa, Russia and Argentina.
 
Though much of this downturn is blamed on the overall economic slowdown, other factors are also at play.
 
In the general budget of 2012-13, presented by the then finance minister Pranab Mukherjee, excise duties on a range of vehicles were hiked to mop up additional revenue to narrow the fiscal gap.
 
Now, after the GDP registered its lowest growth rate in recent times, Patel has asked for the PM’s “immediate attention and intervention” for “some fundamental policy corrections”.
 
He has requested doing away with the 1% national calamity contingent duty and suggested that the duty drawback rates, reduced in October 2012, be restored.
 
Duty drawback is the refund of duties on imported inputs for export items.
 
Patel has also argued that buying of vehicles should be seen as “an important and critical enabler” for economic growth as the sector plays the key role of providing linkages between the different stages of trade and manufacturing.
 
(With inputs from Sumant Banerji)

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