All taxation on the motor industry should be rationalised and should be treated like it is in the rest of the world, RC Bhargava, chairman, Maruti Suzuki said late evening on Monday.
Commenting on the recent clarification of the government on the definition of SUVs that would attract highest cess of 22%, over and above the GST rates on cars, Bhargava said that this would put the automobile industry into 50% kind of tax bracket. “Throughout our history all motor vehicles—SUVs, MUVs or sedans have been in the highest tax brackets. We can’t grow automobile industry with 50% taxation. All taxation on the motor industry should be rationalised in my view and should be treated like it is in the rest of the world,” he said at the company’s annual media meet.
He highlighted that the affordability factor has been an impediment for the car industry’s growth for several years now, and the growth rate is only falling. He said that from 12% in the first 10 years of the present century, it down to about 3% now. “Car penetration figures show that we are adding 1 point each year to the car penetration. It is somewhere around 30 cars per thousand people. It has been going up in the last five years by one person per year. If our target is to get to China’s level which is now 170 (cars) per 1,000 people, it will take us 140 years to get there,” he said.
On the FTAs in the automobile industry, Bhargava highlighted that India has the capability of being far more competitive in manufacturing than anywhere else in the world. “I am not in the least concerned about competition from elsewhere. I think certain volumes we can stand even if it is dumped. I personally believe India should aggressively go and reduce tariffs and enter FTAs at the same time, and we should do what it takes to make our industrial manufacturing much more competitive. FTAs open up a big markets for us to expand, and we can compete not through the dumping route, but by providing good quality, highly competitive vehicles for many parts of the world,” he said.
He added that the change will happen until India has “protectionist mentality”. “Our interest is best protected by subjecting ourselves to competition. Survive or go under, we better change to grow under competition,” he said.
Bhargava said that while the country’s economy is doing well, and the growth rates will be somewhere close to 7%, it would be higher if manufacturing could grow faster.
“Unfortunately manufacturing in India has still remained a laggard. A whole lot of reforms and changes have happened, but for some reason we are not able to make the sort of progress that we should be making,” Bhargava said.
He added that there is a gap in the policy objectives and the implementational efficiencies. “It is better even if your policy is not the best but it is implemented fully and correctly. A good policy can become a bad policy if it is not implemented properly, and average policy can become a good policy if it is well implemented. And I think where we have been lacking all these years is in the implementational machinery,” he said highlighting that there is more work to be done.
“The intentions behind the policy whether it is Make in India or ease of doing business, or behind GST or bankruptcy laws and so many other reforms was to make India a competitive manufacturing destination, it is actually not happening because somewhere the intention of the government is not getting translated into ground reality. And that is where the intentions need to be enforced,” he said.