Rev up incentives

Updated: Jan 21 2005, 05:30am hrs
fe-ICRA SNAPSHOT

The size of the industry is estimated to be Rs 870 billion (as of FY2004). The industry (including components) employs over 450,000 personnel directly and 10 million indirectly.

In the first nine months of FY2005, the volume sales of the industry stood at 6.5 million vehicles. Passenger car sales in the domestic market stood at 0.75 million, CVs at 0.22 million, three-wheelers at 0.22 million and two-wheelers at 4.61 million during April-December 2004. In the two-wheeler segment, motorcycles accounted for 79.5% of the domestic sales during the period.

KEY ISSUES

Increase in input costs since FY2004 continue to affect the margins of players.

Higher costs to meet new emission norms.

CEO SPEAK
I hope the Budget does away with the 8% special excise duty onmulti-utility vehicles and motor cars or at least reduce it by 4% this year.
Jagdish Khattar
Managing director, Maruti Udyog Ltd

The industry suffers from multiplicity of taxes which affect its competitiveness. Delays in regulatory clearances affect the investment climate and result in cost overruns. Higher costs on logistics, power and fuel and inflexible labour laws too affect competitiveness.

Need to achieve a balance between volumes (to break even / improve profits) and wide product portfolio in a highly competitive market.

Incentive for investment in R&D: Budget 2004-05 provided for a weighted deduction of 150% for R&D investment.

fe Perspective

Incentivise ownership of new vehicles and launch retirement scheme for older vehicles to benefit from new emission standards

CII suggestions

Cut customs duty on parts of electrical vehicles to 5%

Extend benefit of 150% deduction of R&D expenses for another 5 years

FICCI Wishlist

Increase depreciation allowance on cars to 33.33%

Cut excise duty on car ACs to 16% on par with other auto components