Scrappage policy announced in Union Budget 2021-22 to push demand, here’s how

"With special emphasis on enhancing domestic manufacturing, government’s decision on allocating Rs 1.97 lakh crore for PLI schemes is a promising move that will help create manufacturing global champions in India across 13 sectors, including the automotive sector."

February 4, 2021 10:15 AM
Voluntary Vehicle Scrappage Policy

 

By Sudhir Mehta

The Indian automotive industry has been eagerly waiting for the Union Budget announcements. After a year of upheavals, India is now slated to be one of the fastest growing economies in the world. The challenge this year was to balance lives and livelihoods, which has been ably addressed. Overall, the budget this year is very positive for both, the overall economy as well as the automotive industry.

A major positive development and a much needed step is in the public sector privatisation. Except for companies in strategic sectors, all other central public sector enterprises are to be privatised or closed. This year’s Budget has very wisely resisted from any tinkering in income tax rates, indicating a movement towards stable tax regime.

We also welcome the announcement and clarity on the voluntary scrappage policy as it is likely to increase demand for new commercial vehicles and passenger vehicles. It will also prove to be environmentally sustainable, encouraging fuel efficiency and reducing oil imports. What is also encouraging is that the budget outlay for the MSME sector has been doubled.

With special emphasis on enhancing domestic manufacturing, government’s decision on allocating Rs 1.97 lakh crore for PLI schemes is a promising move that will help create manufacturing global champions in India across 13 sectors, including the automotive sector. Announcements with regards to a large infrastructure boost will provide ease of mobility, indirectly boosting the opportunities for the auto sector.

Furthermore, the new scheme launched for public bus transport services, will support their augmentation and will bring relief to the much affected bus market and also improve public transport services. The cost of this is estimated around Rs 18,000 crore. A systematic and continuous focus on building rural and agricultural infrastructure while prioritising agriculture credit growth will have a long-term positive impact on rural demand of passenger, small, light commercial vehicles.

Increase in customs duty rate on parts of vehicles from 10% to 15% is also aimed towards promoting domestic manufacturing. Uniform reduction of customs duty on steel and other commodities will have a positive impact on the sector and provide an impetus to the auto-ancillary sector.

A series of measures and stimulus packages will be needed to be implemented throughout the year. To minimise the impact that our economy and almost every single sector has faced over the last year, we need to look at boosting growth in mid to long term. Our focus should be on stability of tax policies.

This Budget is as much important for its exclusions as it is for its inclusions. It has a sharp focus on few areas like health and infrastructure, with an emphasis on disinvestment. This makes it the best Budget of the current FM as both the intent and direction is clear. The government has put its best foot forward and we all need to respond and contribute by increasing our focus on national wealth and job creation.

The author is CMD, Pinnacle Industries,

Director, Force Motors & president, Mahratta Chamber of Commerce Industries

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