Excise duty withdrawal detrimental to demand: Assocham

A day after the central government did not extend the excise duty concessions provided to the automobile and consumer durables sector in 2015, India Inc. Wednesday said the move will hit demand.

According to Associated Chambers of Commerce of India (Assocham), the withdrawal of excise duty concessions comes at a time when manufacturing output has declined by over four percent in October.

The industry lobby also cited that consumer durables sector reported a huge drop of over 35 percent and motor vehicles segment fall by 9.8 percent, and that bringing these segments into higher excise duty regime will spell a deathknell for consumer demand.

"This is not surely in keeping with the spirit of Make in India. The Make in India's first priority should be to revive industrial growth through lower cost of production and lower price tag for the consumer so that demand can be revived," said D.S. Rawat, secretary general, Assocham.

Rawat said the government's efforts on pushing for reforms and ease of doing business will become irrelevant as consumer demand and purchasing power will get affected by this move.

The Narendra Modi-led NDA government in June extended the excise duty concessions of the previous UPA government by six months to Dec 31, but they will not be extended further, a finance ministry source told IANS.

In order to boost the auto sector, excise duty was reduced to 24 percent from 30 percent for SUVs, 20 percent for the mid-sized segment from 24 percent, and 24 percent for large cars from 27 percent.

This, combined with the effect of cuts in fuel prices, led to 9.5 percent spurt in November car sales at 1,56,445 units, up compared to 1,42,849 units in the same month of 2013, according to the Society of Indian Automobile Manufacturers (SIAM).

Overall, the auto industry grew of 10.01 percent in the April-November period this fiscal at 13 million units, as against 12 million in the same period a year ago, following two successive years of slump.

Car manufacturers have been asking the government to extend excise duty relief, saying withdrawal of the incentive could push automobile prices up further next year.