india

Updated: Sep 05, 2019 23:23 IST

Acknowledging a crisis in the automobile industry after 13 consecutive months of decline in sales, minister of road transport and highways Nitin Gadkari said on Thursday that the government would consider a demand for lowering the goods and services tax (GST) on vehicles. He also announced that the government would award a raft of highway projects entailing an investment of Rs 5 lakh crore in the coming months to boost demand for commercial vehicles.

The National Democratic Alliance (NDA) government is concerned about the impact of the slowdown in the industry on employment and economic growth, Gadkari said at the annual convention of the Society of Indian Automobile Manufacturers (SIAM).

Gadkari said he would discuss with the finance minister the prospects of lowering the GST on the automobile sector from 28% to 18%. He again ruled out a ban on conventional petrol and diesel vehicles, and urged automobile companies to set up their own proprietary financing arms to boost sales.

“We need to focus on automobile financing. Even in our road sector, when land acquisition used to be a hurdle earlier, banks used to be aggressive in financing and when we finally solved that problem and saved the banks from Rs 3 lakh crore of non-performing assets, they have dumped us,” Gadkari said. “When things were difficult they aggressively financed us and when situation got better they vanished.”

“I would suggest to auto manufacturers to create a financing company; if the financing company is strong it won’t be loss-making but it will help in increasing your sales,” the minister added.

A cut in GST could help lower the price of vehicles, potentially boosting sales, according to automobile manufacturers. Domestic sales of passenger vehicles fell 30% from a year ago in August, a month in which the government announced several measures such as mandating government agencies and departments to replace old vehicles, increasing depreciation on new vehicles for commercial fleet providers, and urging banks to make auto loans cheaper.

The transport minister said the Centre had identified 68 key highway projects to be awarded over the next three months with an investment of about ~5 lakh crore, which would increase demand for commercial vehicles.

“The construction equipment used for road sector includes a lot of opportunity for the sector, including heavy commercial vehicles. We have accelerated road construction and now trying to award more projects so that demand for trucks and other heavy vehicles picks up which will also give employment and provide a boost to the automobile sector,” Gadkari said.

Gadkari again clarified that the Centre will not impose any ban on diesel and petrol vehicles. Government think-tank Niti Aayog had proposed a ban on three-wheelers using petrol or diesel by 2023 and two wheelers with petrol engines smaller than 150cc by 2025 to boost India’s transition towards electric vehicles. Gadkari, however, warned that the industry will be “bulldozed” if it doesn’t push electric vehicles at the same time.

Sales of four- and two-wheelers almost halved in August, compared to the corresponding period last year. Sales of India’s largest car manufacturer, Maruti Suzuki, declined 32.7%, the worst, drop for the company ever. It could sell only 106,413 units in August, compared to 158,189 units in the same month last year.

“The automotive industry constitutes almost 50% of manufacturing GDP, 15% of GST revenue and employs 37 million people directly and indirectly. Till now, 15,000 contractual manufacturing jobs have been lost and another million are at risk if the slowdown is not reversed,” SIAM president Rajan Wadhera said.

The Union minister assured the sector that their demands for reducing the sales tax on petrol and diesel will also be taken up with the finance ministry.

“We have reduced GST on electric vehicles and now I am trying that it should also be lowered for hybrid vehicles as well. Your other demand that the cost which has increased due to transitioning towards BS VI [Bharat Stage VI] fuel, the tax on petrol and diesel should be reduced, is a good suggestion and I will follow it up with the finance minister,” Gadkari said.

Tata Motors chief executive officer and managing director Guenter Butschek warned that India’s automotive growth story: is about to collapse.

Gadkari was more upbeat and promised a helping hand.

“The sector needs help at this time for increasing sales. Our exports are doing well. I am certain India can become the best manufacturing hub as well. For increasing auto sales, whatever suggestions you can give us, I assure we will ponder over them and figure a way out. I have also asked the finance minister if we should give incentives for expert as well. There are some people who convert problems into opportunity and there are some who convert opportunities into problems. I would ask the industry to not get dissuaded, you have been a success story and graphs in all walks of life keep fluctuating,” Gadkari said.