Union Budget 2021-22 & Indian Auto Industry - Indirectly Perfect

The Union Budget 202122 presented by Nirmala Sitharaman, Union Minister of Finance may have got a standing ovation from the punters of the Indian stock market, but for the Indian auto industry, the direct benefits are miniscule. Indirectly though, the benefits seem to be quite a few.

- Roy Punnoose Tharyan

For those in the electric vehicle industry, they got nothing as a sop directly. The most meaningful sop for the auto industry was the announcement of a voluntary vehicle scrapping policy that will phase out old and unfit vehicles, and provision for fitness tests for vehicles in automated fitness centres. In case of personal vehicles the time period for scrapping will be 20 years, while it would be 15 years for commercial vehicles.

The Budget also proposed innovative PPP models to run more than 20,000 buses that will boost the automobile sector, provide fillip to economic growth and create employment opportunities for the youth. The Minister also proposed that the duty on certain auto parts be increased to the general rate of 15%.

But it must be remembered that one man’s meat is sometimes another man’s poison. While the Automotive Components Manufacturers Association (ACMA) noted that the increase in basic customs duty on select auto components will encourage local manufacturing of such items, the Society of Indian Automobile Manufacturers (SIAM) noted that the increase in customs duty on auto parts / lithium ion cell parts is of concern and is likely to increase cost of manufacturing automobiles, wherever indigenisation is yet to happen.

AUTO SCRAPPAGE POLICY

The Finance Minister announced a voluntary vehicle scrapping policy to phase out old and unfit vehicles. Fitness tests have been proposed in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles.