Govt mulls refinance for state transport firms

The government is considering a proposal to provide refinance facility for loans to the state-owned transport undertakings as part of the second fiscal package that is likely to be announced soon.

This is to stimulate the demand for commercial vehicle manufacturers like Ashok Leyland and Tata Motors at a time when demand from private truck operators has dipped sharply because of the economic downturn. The move is also intended to enable state transport undertakings, most of which are incurring huge losses, to access finance to replace their ageing bus fleets.

The proposal was part of the Committee of Secretaries’ agenda at its Friday meeting, said a government source. It is not certain whether the proposal was part of the final recommendations to an apex committee headed by the prime minister.

Bus sales constituted 17 per cent of the commercial vehicle industry’s sales of 270,994 units in 2007-08. However, in October and November this year, both Ashok Leyland and Tata Motors reported sharp production declines because of inventory build-ups. Between April and November, production of medium and heavy commercial vehicles dipped 14.6 per cent, against a 3 per cent drop in the same period last year, according to data provided by the Society of Indian Automobile Manufacturers.

Meanwhile, the Confederation of Indian Industry has sought a central plan allocation for state transport companies to buy buses. The industry body has also asked for a relaxation of provisioning norms by banks for commercial vehicle loans and concessional refinancing of vehicle loans at 7 to 9 per cent.