Only one of three Budget sops for auto industry is significant

Amongst the three excise duty cuts detailed in Budget 2009-10 for the auto industry, only one has benefited a large segment of the industry, say company executives. That was the cut of Rs 5,000 on large cars with engines of 2,000cc and above. Car companies like Hyundai, Honda and Hindustan Motors followed and lowered prices of their vehicles to the same extent.

The other two duty cuts benefit almost none. “The excise duty cut on petrol engine-driven vehicles and on the chassis of such vehicles have no relevance, since not a single manufacturer straps a light commercial vehicle (LCV) in the goods carrier segment with a petrol engine. It’s uneconomical for the fleet operator. All our LCV vehicles are either on diesel or on CNG if they ply inside Delhi,” says an industry executive.

The Budget speech referred to petrol-driven lorries and trucks. An executive from the Society of Indian Automobile Manufacturers (Siam) says it actually means LCVs, which also includes three-wheelers that fall in this segment. Amongst the three-wheeler manufacturers in the goods segment, none manufacture vehicles kitted with petrol engines and hence do not qualify for any excise duty cuts. Like LCVs ,they are largely fuelled by diesel.

The duty cut on petrol-driven LCVs benefits just one single vehicle model, which is Maruti Suzuki’s Omni Cargo. That’s because the Omni (a multi purpose vehicle in Siam’s classification) is the only goods carrier vehicle in the country that runs on petrol. Post the excise duty cut from 20 per cent to 8 per cent, the price of the Omni Cargo now stands at Rs 1,97,000 (ex Delhi showroom).

Other manufacturers of LCVs include Tata Motors, Mahindra & Mahindra, Hindustan Motors, Piaggio Vehicles, and Force Motors. None have an LCV powered by a petrol engine.

The third duty cut pronounced in the budget provided an excise duty cut on the chassis of petrol-driven vehicles from 20 to 8 per cent, with the fixed component of Rs 10,000 remaining. An industry executive said LCVs, unlike heavy commercial vehicles, are sold as fully built units. Hence, they do not qualify for this excise duty cut on the chassis.