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Hoping for cheaper cars? Budget may disappoint you

business Updated: Feb 22, 2015 23:11 IST
Timsy Jaipuria
union budget

If you were banking on cars prices falling after the Union budget, brace yourself for disappointment: the government is unlikely to reduce excise duties on passenger vehicles.

According to sources, the ministry of heavy industries sought a revival of excise duty benefits on passenger vehicles, but the finance ministry has dismissed this on the grounds of a decline in revenue collections.

This is likely to dampen the industry. Passenger vehicle sales declined for the first time in a decade in 2013-14. The then UPA government slashed excise duties by 4% to 6% across all segments in its vote on account last year. The Modi government extended these concessions till December, but ended them in January. Vehicle prices have since been increased, and the nascent recovery is threatened.

“We expect a reduction in excise duties on automobiles in this budget. There is no fundamental demand for automobiles in the industry right now so a duty cut is neeeded to keep it going,” said Sugato Sen, deputy director general, Society of Indian Automobile Industries. “The automotive industry creates thousands of jobs across the value chain so to keep its growth intact should be of great importance.”

“India’s public transport system is among the worst among developing economies across the world, and cars are as much a necessity as air conditioners in summer,” said a senior executive at a top car company. “There should at least be some relief for small car and two-wheeler buyers.”

Sources said the only likely benefit for the auto sector may be a correction in the inverted duty structure, which the finance ministry thinks will be enough to bring down manufacturing costs. In heavy vehicles, for instance, some components attract higher import duty than the finished product, and this could be corrected.

Some other demands of the industry, such as a provision to phase out cars older than 15 years may also not be met in the budget.