For the upcoming Budget 2021, Gurpratap Boparai, MD, Skoda Auto Volkswagen India says:
Despite the contraction of demand due to the instability poised by the Covid times, the industry has continued to show resilience. And if domestic sales numbers are any indication, the pent up demand of the first half of the year partially compensated itself in the subsequent quarters.
The Union Budget 2021-22 can prove to be a turning point for the Auto Industry by committing to some relief in the de-facto- taxation faced by the sector today. A uniform tax rate of 18% should be applicable for all categories of vehicles, along with components to avoid an inverted duty structure.
Not only does the high tax rate impact local consumption, but it continues to hurt the potential to make India the manufacturing destination of the world. Although Goods and Services Tax (GST) rates are determined by the GST council, removal or a reduction in the cess is vital for reviving demand in the sector and enable the increasing preference towards personal mobility. As demand picks up, government revenues are also bound to increase as the revival of the industry would have a benevolent ripple effect on the entire economy.
Another unmet demand from the industry is the scrappage policy. The Scrappage Policy has been long overdue after its initial draft was proposed in May 2016. On one hand, the scrappage policy will directly aid consumption on account of replenishing volumes, the benefit to the industry will depend on the age qualification for the scrapping vehicles and the extent of the incentive offered.
The Center’s focus on increasing disposable income to encourage consumption has already shown promising results with signs of green shoots in a troubled economy. This can be supplemented by considering an extension of ‘deduction of interest’ on the loan for EVs to other vehicles to further boost consumption.
One of the key policy announcement last year was the production-linked incentive (PLI) scheme, which was a recognition of the importance of the Indian Automobile Industry for the country and its support of the Government’s Atmanirbhar Bharat mission. While the finer details of the scheme are still awaited, the YoY growth targets in the draft scheme will be hard to achieve and a more realistic growth target should be considered to help in this key period of recovery.