Budget 2018 presented by Finance Minister Arun Jaitley has missed out on many important touch points for the automobile sector, especially for electric and hybrid cars. Out of the wish lists of automakers for the Narendra Modi government, most were not answered. Below are the top hit and misses for the Union Budget 2018 for the auto sector.
Misses of Budget 2018:
– The biggest miss and probably the need of the hour – vehicle scrappage policy found no mention by the finance minister and the auto industry has been waiting for this for years now. The auto industry had proposed ‘Voluntary Vehicle Fleet Modernisation Plan’ to the government, which keeps older cars off the roads. An appropriately structured incentive scheme for scrappage of old cars (which invariably are more environment polluting) could have been a game changer, both for the industry and for the government.
– The government has announced its move to electric mobility and time and again has warned and threatened automobile manufacturers on moving to an alternative source of power for vehicles. However, the big piece of roadmap and lowering tax on EVs and electric components is still missing. Finance Minister did not announce anything on FAME incentives. Indian auto-industry was hopeful of receiving a boost to EVs but once again was left disappointed with no mention of it.
– The other big expectation by the auto sector was the revision of weighted deduction on Research & Development to 200% from current 150%. This would have been a big boost for EV battery manufacturing and to control air-pollution as we shift towards BS-VI. But once again, nothing on this front.
– No change in personal income tax could also lead to a marginal slowdown in car and two-wheeler sales in India. There is no change in the tax slabs for Income tax. A revision of taxable income was expected from Rs 2.5 lakh to Rs 4 lakh.
– Increase in fiscal deficit: A fiscal deficit occurs when a government’s total expenditures exceed the revenue that it generates, excluding money from borrowings. Deficit differs from debt, which is an accumulation of yearly deficits. The fiscal deficit has been revised to 3.5% of the GDP for the next financial year 2018-19, from 3.2% earlier.
– The government has also set aside Rs 50 lakh crore for infrastructure development but nothing for the development of EV infrastructure has been mentioned. This contradicts government’s own vision of electric mobility and lowering oil import bills.
– While many might say that it is nice that on the indirect taxes side the Finance Minister increased the customs duty for auto components to 20% from existing 15% to boost Make-In-India. While this is true, we believe this might negatively affect some of the important components required to push development and adoption of EVs in India.
Hits of Budget 2018:
– Government’s strong focus on farmers and agriculture by giving a support price of at least 150% of input price per farm for farmers and investing Rs 500 crore in Operation Green along with Rs 2000 rural infrastructure has brought in a cheer for tractor and farm equipment manufacturers and will also lead to growth in two-wheeler sales in India.
– The government will launch special schemes to reduce Air pollution in Delhi/NCR. It aims to reduce smoke released due to crop residue burning in Haryana, Punjab and UP that creates a thick layer of pollution above the capital. If implemented correctly, it means no more Odd/Even formula in Delhi.
– Allocation of Rs 16,000 crore fund for electrifying rural India in long term will have a positive impact on EV industry and developing the overall EV ecosystem.
– One of the things auto industry might be happy about its the reduction of Corporate Tax to 25% for companies with a turnover of Rs 250 crore revenue from existing Rs 50 crore. So there has been a 5% reduction in Corporate Tax.
– Reduction in excise duty cut of unbranded petrol and diesel by Rs 2 /litre on unbranded diesel and petrol is a decent temporary relief.