The Indian automobile sector is still struggling with notorious levels of underperformance. Hence, the expectations for incentives, policies and the much-needed relief for the industry were high from the 2020 Budget. However, Finance Minister Nirmala Sitharaman did not confirm the adaptation of a single measure to directly aid the automotive sector in her presentation. Instead, she smartly evaded any mention of the industry at all.
Budget 2020 and the Indian Automobile Industry
Before the Budget 2020 was going to be presented, many notable people from the auto sector showed concerns and gave ideas on how to help the declining situation of the industry. The Society of Indian Automobile Manufacturers’ (SIAM) president Rajan Wadhera had asked for a reduction in GST and incentive on vehicle scrappage. Also, he urged the government to consider decreasing the GST rates for BS-6 vehicles effective from April 1, from 28% to 18%, as a way to reduce the demands. He has also urged the government to increase budget allocation for ICE bus acquisition by state transport undertaking.
What’s more disappointing is that even in times such as these, not only was the auto sector ignored in the budget, the Finance Minister did not include any announcements about the electric vehicle charging infrastructure either. The government has openly been promoting EVs for a while, and this would have helped in making customers switch to them more accessible.
The hopes of the industry were high on any announcements regarding EVs but had little luck in this department. The government did announce that they will provide INR 4,400 Cr for improving air quality measures in the cities with a population above a million. The states will also be provided with the necessary incentives and parameters for this, though one can only hope that they include some of these funds for the promotion of electric vehicles, which would play a vital role in achieving cleaner air.
Nirmala Sitharaman stated that the accelerated development of highways would begin with a deadline of 2023 for the Delhi-Mumbai expressway and two other such projects. Moreover, monetisation of about 12 of highway bundles of more than 6,000 km is being planned and will be completed before 2024.
Nevertheless, the lack of a direct acknowledgement has come as a surprise and a killjoy for the automotive sector. The automobile manufacturers can now only wait and see if the announcement of benefits and reduction in income tax slabs in other areas will have some indirect consequence on the industry or not.
Federation of Automobile Dealers’ (FADA) President Ashish Harsharaj Kale said that the focus of the budget on agriculture, rural development and irrigation should result in increased rural demand in the next three to four months if all the measures are taken immediately. He emphasised on the importance of an increase in demand for two-wheelers, tractors and small commercial vehicles. In the end, he added that it is disappointing that, as a part of the auto ecosystem, no direct benefits for the automobile industry have been announced.
Pankaj M Munjal, chairman and managing director of Hero MotorCorp has also commented saying that the government should incentivise EV manufacturers, and use a portion of the 1.7 lakh Cr reserved for boosting the transport infrastructure and making e-bike friendly roads and parking spaces to reduce congestion in urban areas and promote environmentally friendly transportation.
He also said that the reduction of GST on EVs to 5% was welcome and helped automakers too but he hopes that the government would reduce the GST rates in order to promote and encourage EV factories to set up battery manufacturing units in the country.
During the press Q&A session, in response to a floor inquiry about the absence of spotlight on the automobile business, the Finance Minister said that her methodology with this financial limit has not been industry savvy and subsequently, numerous different divisions were not directly addressed either. She did, however, express that the administration is moving in the direction of a scrappage arrangement and something exclusive is in the pipeline though not yet ready to be on the page and hence remains to be announced. She included that her methodology was planned for getting cash under the control of consumers.
The vehicle part contributed a considerable INR 1,20,000 crore in GST assortment in the fiscal year 2019 – more than ten per cent of the absolute Rs 11,00,000 crore produced by the administration and it represents seven per cent of the nation’s complete Gross domestic product and about fifty per cent of manufacturing the Gross domestic product.
Furthermore, it utilises more than 35 million individuals directly and indirectly. Information discharged by SIAM a year ago claims that more than 2 lakh employees have been laid off, while ACMA too shows a loss of around 1 lakh probationary specialists in the automobile sector. In this way, the hopes for measures of an expedient recovery were very much established. However, the automotive industry will now need to plan and prepare for a seemingly difficult ride ahead.