News: Excise duty on all cars may be lowered

(DNA 27/10/2006) New Delhi - The frequent price increases by leading domestic car makers appear to have triggered a thinking about rationalisation of excise duties.

The excise sops announced for small cars in the Budget earlier this year were meant to make vehicles of certain dimensions more affordable for consumers.

But with a series of price increases effected by almost all car makers over the last six months across all vehicle sizes, there is a feeling within the echelons of power that the excise sop has not really served its purpose of making small cars more affordable to the common man.

To set the situation right, the Government is now thinking of lowering excise across all cars, including larger ones such as the sedans.

“This is the only way we can spur the domestic industry to become competitive. Why should only small cars enjoy the excise benefit, when manufacturers of these cars have not effectively passed on the benefits to the consumer?
If India is to become a global hub for the automobile industry, it should be far more competitive,” official sources told DNA Money.

The recommendations of 2006-07 Budget allow any car up to 4 metres in length and with 1200 cc engine capacity (for petrol) or 1500 cc (for diesel) to qualify for the lower 16% excise duty against 24% for all other automobiles manufactured in India.

This definition enables only seven existing cars to qualify for lower excise - Maruti 800, Alto, WagonR, Zen and Omni; Hyundai Santro and Indica petrol. It leaves out the premium hatchbacks from Maruti and Hyundai and virtually all sedans and larger cars.

If the current thinking within a section of the Government does find favour with the finance ministry, all cars regardless of length, engine displacement etc would qualify for the lower 16% bracket. But whether they will consequently become cheaper also remains to be seen.

Many sections of the automobile industry have been arguing against the Budget provisions, citing the auto policy. The policy defines a small car as having length up to 3.8 metres, without specifying the engine capacity or the type of fuel used.

The Budget provisions had extended this definition to 4 metres. Then, the recently released Auto Mission Plan - which charts a roadmap for the automobile industry for the next decade - also says the government will make all necessary policy interventions needed to convert India into a global hub for passenger cars.

NATRIP signs pact with VCA: The National Automotive Testing and R&D Infrastructure Project (NATRIP) on Friday signed an MoU with the Vehicle Certification Agency (VCA) of UK to offer homologation certification for Indian vehicle manufacturers who export to various countries in Europe, parts of US, Japan and Australia.

As on date, any vehicle exported from India to any other country needs to be physically transported to the destination country for certification before being launched. This collaboration is expected to bring substantive savings in homologation and certification costs that the Indian industry incurs overseas.

VCA is an executive agency of the Department of Transport, Government of UK, and provides vehicle certification across a host of countries.

NATRIP, started under the aegis of the Ministry of Heavy Industries, is the operative agency for upgrading and expanding automotive testing facilities in India.

With an investment of Rs 1,718 crore already earmarked, NATRIP is on course to set up two new homologation centers in Haryana and Chennai besides upgrading the existing ones at Pune and Ahmedabad.