Union Budget 2021-22 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.
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.
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%.
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.
Immediately after the announcement, Union Minister for
MSME and Road Transport & Highways, Nitin Gadkari welcomed the Voluntary
Scrappage Policy announced in the Union Budget, and said that declaration of
the details of the policy will be done within 15 days from this day of Budget
his post-budget interaction with the media at his residence, Gadkari said
that the scrappage policy will lead to new investment of around Rs.10,000
crores, and create as many as 50,000 jobs. The Minister said the policy would
cover an estimated 51 lakh light motor vehicles (LMV) that are above 20 years
of age, while another 34 lakh LMVs are above 15 years. It would also cover 17
lakh medium and heavy motor vehicles, which are above 15 years, and currently
without valid fitness certificates. These vehicles are estimated to cause
10-12 times more pollution than the latest vehicles. Outlining the benefits
of the policy, Gadkari said it would lead to recycling of waste metal,
improved safety, reduction in air pollution, reduction in oil imports due to
greater fuel efficiency of current vehicles, and stimulate investment.
also welcomed the increased outlay for the highways sector, to Rs. 1,18,000
crores, with the highest-ever capital investment of Rs.1,08,000 crores. While
welcoming the increased allocation, the Minister said that the Ministry’s
increased stress on monetization of highways will help in expanding the road
network in the country.
many in the auto industry hailed this proposal, the Indian Foundation of
Transport Research and Training (
IFTRT ) warned that there would be a huge backlash in the country among small
fleet owners , who may in reality go jobless as mandatory scrappage policy is
unwarranted and irrational from socio- economic structure of trucking
business and that of the developing country like India.
as stated in Union Budget that vehicle scrappage policy is going to be
voluntary wef 1.4.2022 and vehicles ( CVs of 15 year age and PVs of 20 year
age ) shall go through automated maintenance and inspection test ( special
mechanical computerised fitness test )which now does not exists , then there
would be minimal scrappage in real terms of trucks, buses, vans , cars etc,” said SP Singh, Sr. Fellow,
IFTRT. Singh said that with the proposed scrappage policy, the government was
only playing into the hands of the auto industry.
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.
SOCIETY OF INDIAN
AUTOMOBILE MANUFACTURERS: Calling it
a visionary budget, the Society of Indian Automobile Manufacturers (SIAM)
President Kenichi Ayukawa said the budget focusses on three broad themes.
First, it is a remedy for the current challenges post-Covid with its focus on
human health and asset reconstruction. Second, it gives a major impetus to
infrastructure with a 5-year roadmap for fiscal consolidation. Third, it takes
bold measures for enhancing efficiency and competitiveness like privatisation,
competition in power distribution companies, City Gas Distribution (CGD)
expansion in 100 more districts and takes into account enablers like
infrastructure financing. “A good macro-economic growth will translate to good
demand for auto sector also,” said SIAM.
announcement of major highway projects with sizeable increase in infrastructure
outlay will help revive demand for both commercial vehicles and private
vehicles. The allocation for procurement of 20,000 buses will directly benefit
the industry. The addition of 100 new districts to the city gas distribution network
for natural gas will help clean, efficient and affordable mobility for the
SIAM awaits the details of the Vehicle Scrappage scheme, it hopes and requests
that fitness testing and certification should be much earlier and at frequent
intervals to ensure safety, environment friendliness and fuel saving,” it
reduction in customs duty on some steel grades, and revoking of countervailing
duty and anti-dumping duty on certain steel products is a welcome step. Since platinum,
palladium and rhodium are not available in India and are essential for emission
control, their duty could have been made Nil, SIAM noted.
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, said Kenichi Ayukawa of SIAM
COMPONENTS MANUFACTURERS ASSOCIATION: Deepak Jain, President, ACMA,
said, “The vision of an Aatma-nirbhar Bharat enshrined in the Union Budget,
coupled with the ‘Sankalp’ of ‘Nation-First’ will be the bedrock to propel us
further as we redefine our economy in a post-pandemic world. Significant outlay
for vaccination in the country will add to the confidence of a resurgent
with regards increased spend on road infrastructure, voluntary scrappage
policy, Research & Development and PLI among others, augur well for the
automotive sector. Further, continued focus on building rural and agricultural
infrastructure and prioritising agriculture credit growth will have long-term
positive impact on rural demand for vehicles”, added Jain.
further mentioned, “Increase in basic customs duty on select auto components
will encourage local manufacturing of such items. It is also heartening that
the budget outlay for the MSME sector has been doubled compared to last year.
The auto component industry is dominated by MSME and this will provide them the
necessary succour as the industry recovers.”
AUTOMOTIVE DEALERS ASSOCIATIONS:
Vinkesh Gulati, President of the Federation of Automotive Dealers Associations
(FADA) hailed the scrappage policy
announced by the Finance Minister. “If we take 1990 as base year, there are
approximately 37 lakhs CVs and 52 lakhs L PVs eligible for voluntarily
scrappage. As an estimate, 10% of CV and 5% of PV may still be plying on road.
We still need to see the fine prints to access the kind of incentives which
will be on offer and thus have a positive effect on retail,” he said.
He further added that the 6,575 km highway
work proposed in Tamil Nadu, Kerala, West Bengal and Assam and another 19,500
km work of the Bharatmala project will
definitely add fillip to much needed revival of Commercial Vehicles especially
also said that the Government’s reduction of customs duty on steel products to
7.5% will benefit Auto OEMs. But he
added that, “While we expected disposable income for individuals to increase
with enhancement of IT slabs and depreciation benefit on vehicles for
individuals, the same has not been taken into consideration.”
INDIAN FORGING INDUSTRY: Vikas Bajaj, President, Association of
Indian Forging Industry (AIFI) said this year’s Union budget is positive, as
well as a progressive one with a strong drive towards the country's
socio-economic growth. It focuses on the Railways, Power, Health
Infrastructure, Banking, Insurance and Agriculture sectors. The positive step
of reduction in customs duty uniformly to 7.5% on semis, flat, and long
products of non-alloy, alloy, and stainless steels would certainly contribute
to better raw material prices and reduced input costs.
increased government attention on the highways and infrastructure sector would
definitely contribute to a significant impact on the manufacturing and Auto
industry and help in employment generation which is the most critical need to
revive the economy," he added.
DEVELOPMENT COUNCIL: Nikunj Sanghi, Chairman, Automotive Skills
Development Council (ASDC) said that the Union Budget 2021 has given due
importance to skilling and education which is a welcome move in today's
skill-driven industry. The government’s focus on supporting local
manufacturing, skill development, and a heightened emphasis on job creation
will lead to greater opportunities for the youth of the country.
addition to that, the partnership with the United Arab Emirates and Japan to
promote industrial & vocational skills, techniques, and knowledge is a
major boost for the sector. Also, since automotive is the biggest organised
employer in the country, hence the realignment of the existing scheme of
national apprenticeship training scheme for providing post-education
apprenticeship training of graduates and diploma holders in engineering over
3000 crores is also a positive sign for automotive skilling,” he noted.
Guenter Butschek, CEO & MD, Tata
Motors said that the significant increase in overall allocation towards capital
expenditure has been complemented with comprehensive measures to catalyse
multiple levers- focus on rural, infrastructure investment, impetus to
manufacturing, social welfare, entrepreneurship and digital - to enable overall
too acknowledged the Finance Minister’s announcements on voluntary vehicle scrapping
policy, augmenting public transport system in urban areas, continuing focus on
adoption of cleaner fuels, and enhancing outlays for developing road
infrastructure and expanding the Swachh Bharat Mission.
Martin Schwenk, Managing Director and CEO, Mercedes-Benz India that though his
company welcomes the policy stability that the budget provides to the industry
by no new announcement of direct taxes, “we would have liked some reduction in
compensation cess. It’s good to see some positive movement through the
scrappage policy and we also expect the capital expenditures to indirectly help
the industry. The decision to spend more on infrastructure despite of the high
fiscal deficit, will boost the overall economic revival and we should see
positive impact on the PV market. However, the increase in the rise in auto
component duties is unexpected in such revival period, and it will increase the
production cost, leading to higher cost for consumers. There could have been
further push towards e-mobility by lowering import duties on EV.”
ASHOK LEYLAND: .
Vipin Sondhi, Managing Director and Chief Executive Officer, Ashok Leyland,
SAID THAT THE Finance Minister has unveiled a well thought out budget anchored
by six key pillars. This could set out a virtuous cycle for Growth and Job
creation spearheaded with a thrust on Public investment in Infrastructure and
Health. The key will be in effective implementation.
said the commitment to augment the country's road infrastructure with projects
for building 8,500 km of highways and economic corridors augurs well for
surface and road transport.
Rs 18,000-crore scheme to augment public transport in urban areas with the
addition of 20,000 new buses in a PPP model would ensure cleaner and efficient
public transportation and ease congestion.
also termed the voluntary scrappage policy as a positive announcement. “The
thrust on R&D for National Priority Projects and the PLI scheme will be key
enablers to attain our Prime Minister’s vision for Atmanirbharta in the
manufacturing sector,” he added.
VOLKSWAGEN INDIA PRIVATE LIMITED: Gurpratap Boparai, Managing
Director, Skoda Auto Volkswagen India Private Limited said the Budget augers
well to create capacity for developmental and growth in the country. “Increased
outlays in the road sector, infrastructure development and introduction of the
voluntary vehicle scrappage policy will not only create a safer and environment-friendly
auto sector but also drive replacement demand in the sector. The support
announced for the rural economy and farm sector will be a big boost for wealth
creation in the non-urban markets and increase the scope for auto demand in
these regions. While further details of the prior announced PLI scheme is
awaited, the same is expected to help the Indian auto industry to improve
production efficiency and become self-reliant - "atmanirbhar',” he said.
pointed out that, “It is important to keep in mind that even in the coming
financial year, the passenger vehicle market is unlikely to reach the level of
2018 and the much-required rationalisation of GST and cess to aid the auto
industry was missing. Additionally, the increase in customs duty on certain
auto parts to 15% will further increase input costs and prices for cars which
depend on specialised components which cannot be manufactured locally due to
PASSENGER CARS: Ashish Gupta,
Brand Director, Volkswagen Passenger Cars said the Budget has the potential to
revive the economy at large. “The focus on the six pillars, with greater
impetus on healthcare, infrastructural and connectivity development and rural
economy will have a positive impact on the businesses. With respect to the auto
sector, increase in custom duty on certain auto parts would impact the input
cost, although we’re yet to assess the financial impact. On the voluntary
scrappage policy, strict governance on the fitness test would determine the
benefit on the environment and pollution reduction,” he added.
JK TYRE &
INDUSTRIES LTD: Dr. Raghupati Singhania, Vice-President JK
Organisation and Chairman & Managing Director of JK Tyre & Industries
Ltd, said the Minister had presented a ‘pro-growth’ budget in these
unprecedented times, which will give a boost to the Indian economy which is on
path to recovery. “Rightly, there is a huge emphasis on infrastructure, which
will help revive economy as well as generate employment. Finally the much
awaited scrappage policy has been announced, which is a welcome step. This will increase sale of new vehicles and
in turn boost tyre demand. Refocus on healthcare and skill building is very
critical for a healthy growth of Aspirant India. The key, however, is faster
implementation of the various important measures announced, which will have a
meaningful impact on economy,” he said.
Nagesh Basavanhalli, Group CEO & MD, Greaves Cotton Limited noted that the
government’s resolve to support manufacturing and infrastructure sector is
commendable. The emphasis on government spending in building pan-India
transport and allied infrastructure should have a positive impact in reviving
consumer demand for vehicles. The allocation of a sizeable sum towards the PLI
scheme will help the industry create jobs and boost economic growth. While the
auto sector would have liked to see more direct measures in the budget, the
Scrappage policy is certainly a step in the right direction, he added.
SOMA COMSTAR: Sunjay
Kapur, Chairman, Soma Comstar said though the initial reaction of the Budget is
a positive one, over the next few days, as the interpretation kicks in, the
implications of the Union budget will gain clarity. Giving it a thumbs up for
now, Kapur said that a significant emphasis on healthcare and infrastructure is
very positive. “The highlights for me
include, the positive step towards the roll out of scrappage policy with a
defined 20 years for private vehicles and 15 years for commercial vehicles.
There is an increase in custom duty by 15% on certain auto parts. The LIC IPO
in 2022 was a long-awaited announcement. Along with that, a PSU bank, one
Insurance company, and other disinvestment plans will lead to liquidity for the
government. Air India, BPCL, SCI, CONCOR disinvestments to head to the finish
line. And Niti Ayog structuring a next list of disinvestments is the government
getting back to business is an upswing. The FDI limit increased significantly
shows a promise to further India’s presence on a global platform, 49% to 74% in
the Insurance sector is a good leap in the positive direction. Removal of GST
anomalies shows that they are fine tuning the GST implementation. An important
announcement was the vaccine roll-out. In never dealt before situation, the Rs 35000
crore expenditure on vaccination is a much-needed step to bring confidence in
our country to find a semblance of normalcy. The announcement of spending on
infrastructure (Rs 118,000 crore for Ministry of Roads) is strategically
well-allotted funding via the set- up of a professionally- managed Development
Finance Institution (DFI). As the network of public transports solidifies
across Tier II cities, the usage of metros and public buses leads to an
inevitable increase in job opportunities,”, Kapur stated.
Nishant Arya, Executive Director, JBM Group said that the allocation of Rs
18,000 crore for the public bus transport services has come as a sigh of relief
for the bus makers who have been caught in the doldrums from 2019. The proposed
PPP model will in turn help the sector to create employment as well and
overcome the adverse effect of the pandemic. “We, as an industry player, are
now looking forward to the details of the vehicle scrappage scheme which will
be an added advantage for the auto sector. The heavy and medium commercial
vehicle sector will also have a boost in demand as a sum of Rs 5.54 trillion
has been allocated for infrastructure development. The 2.5-5 percent reduction
in the customs duty on some of the semi-finished and finished steel products
will have a positive impact on the automotive industry,” he said.
CUMMINS INDIA: Ashwath
Ram, Managing Director, Cummins India said that at a first glance, it appears
to be a progressive budget. “There is a focus on the socio-economic development
of the country with an emphasis on Railways, the Power sector, infrastructure,
healthcare, and enhanced digital connectivity. The voluntary policy on the
scrapping of vehicles will have a positive impact and will drive the commercial
vehicle and auto sector forward. The industry wanted an incentive-based scheme
so we are still seeing the details. In addition, MSMEs and other user
industries have been severely affected by the recent sharp rise in iron and
steel prices. The industry will definitely receive a push by the decision to
double the allocation of MSME and reduce the customs duty on some of the steel
products. The focus on highways and the infrastructure investment plan will
definitely give the necessary impetus to the CV and construction equipment
businesses," he added.
KPMG: Waman Parkhi, Partner, Indirect
Tax, KPMG in India said that the “customs duty rates on certain auto parts such
as safety glass, electrical lighting and signaling equipment, windscreen
wipers, etc. has been increased from 15% from the current rate of 7.5%/10% with
an objective of promoting Indian manufacture of goods. 13 PLI schemes for
various manufacturing sectors will also positively support such manufacture.
Voluntary vehicle scrapping policy besides contributing to lower emissions and
improving safety on road would also generate demand for vehicles for the Auto
NIPPON PAINT INDIA:
Sharad Malhotra, President – Automotive Refinishes and Wood
Coatings, Nippon Paint India said that with an expansionary Budget that focuses
on growth, the Finance Minister “has delivered on major counts. The Budget has
announced a massive infrastructure boost with huge outlay for Railways and
privatising airports. Along with this, measures that will increase consumer
spending and make India more self-reliant are a step in the right direct.
Fitness testing for both PVs and CVs is a positive move that will not only
generate employment opportunities but also ensure a cleaner environment. Our
sector has got a favorable boost in form of FM's voluntary vehicle scrappage
SCHAEFFLER INDIA: Harsha
Kadam, CEO Schaeffler India and President, Industrial Business said that this
budget has the ingredients to deliver long term growth. “The government is
bullish on public spending and we are encouraged by it. We were certain that
Budget 2021 would surely consider the gloom that hovered over the Indian auto
industry and it is reassuring to see that it did. The infrastructure boost will
surely benefit the heavy and medium commercial vehicle segment, which was much
needed. The voluntary scrappage policy implementation is surely a step in the
right direction keeping in mind the environment and auto industry at large. We
have been awaiting it for a while and this is a step forward for sure. In fact,
the announcement regarding the PLI scheme investments is going to play an
accelerator for the manufacturing sector, which has seen really tough times
along with the auto industry. This gives reason for double celebration as it
will encourage global manufacturing firms and also provide incentives for local
manufacturing firms to expand. This is a huge step in terms of creating jobs
and opportunities for the youth. This budget has been very progressive for the
railways as well, an important sector for us. The decision of commissioning
dedicated freight corridors which will not only improve the overall movement of
goods but also spur economic activities in the long run. The continued push for
investment in railway with the additional allocation towards MetroLite and
MetroNeo for smaller cities for bodes well in the long run. The only caution
here is to look at the inflating fiscal deficit.”
Agarwal, Co-founder and CFO, CARS24 noted that "The 2021 Union Budget is a
big booster for spearheading the economy’s growth. We are glad the Government
has announced investment in road infrastructure coupled with announcement of
scrappage policy. These will bode well for the auto industry as they will help
it achieve the twin objectives of boosting demand whilst recycling old and
polluting vehicles in our country. While we look forward to the minute details
of the policy, ensuring seamless execution will be key.”
further stated that with the government allowing one man companies and
increasing the threshold for the definition of small companies, “we expect and
hope that used car dealers in India will consider shifting from sole
proprietorship to companies. This will make them further organised and open up
different forms of financing markets for them. Extension of one year tax
holiday will also prove to be a welcome move for start-ups in India. We are
sure that the announcements made under 2021 Union Budget will help sustain the
pace of growth witnessed in the last few months in the auto industry."
Farrokh Cooper, Chairman & MD, Cooper Corporation Pvt. Ltd found
the Budget 2021 optimistic, “driving the country towards Aatmanirbhar Bharat by
putting significant stress on Railways, Power sector, infrastructure
healthcare, banking, insurance, and agriculture, which will not only enable the
country to revive its economy but will also stimulate growth.”
too lauded the voluntary policy on the scrapping of vehicles and said this
would have a positive effect and will move the commercial and automobile
industries ahead. The industry would definitely be encouraged by the decision
to double the allocation of MSME and to reduce the customs duty on steel.
Focusing on highways and the investment plan would certainly give the CV and
construction equipment the requisite impetus. The government’s increased focus
on the infrastructure sector will certainly bring in positive impact, he added.
Nandigam, CoFounder & CSO, CredR, India's largest omni channel used
two-wheeler consumer brand, said post Covid Budget has been balanced given the
situation where the entire economy is struggling. “There are few good steps taken by the
government. But we were expecting more. Most importantly, they have not taken
any measures on relief in the direct taxation as this would have had a direct
impact on consumerism and the ability to purchase private automobiles or apply
for a personal loan. We welcome the steps taken in the scrappage policy and
extension of tax holiday for start-ups. For startups, this comes as a breath of
fresh air to the struggling startup ecosystem. With the pandemic disrupting
business and earning this year, the amount saved from this tax holiday will
help startups to reinvest this money into building business," noted
Manish Bhatnagar, Managing Director, SKF India note that the this Budget is
“one of a kind” and has aimed at the revival of the economy. “Along with
bringing cutting edge technology, increasing the demand for new commercial
vehicle and passenger vehicles, creating new jobs, schemes like the PLI and
voluntary scrappage policy are likely to nurture and boost the Indian
manufacturing industry to become an integral part of the global supply chains.
Furthermore, ensuring liquidity in the economy and unhindered flow of capital,
the package for roads and railways infrastructure is bound to give an impetus
to the covid-hit economy. The robust push to infrastructure including economic
corridors, manufacturing and MSME’s collectively, is likely to help boost
demand for heavy and medium duty CV’s,” stressed Bhatnagar.
Tarun Lawadia, Founder & CEO, PumPumPum, the only company in India to offer
used car leasing in corporate and retail segment, said the voluntary vehicle
scrapping policy will certainly strengthen India’s fight against pollution
across cities and promote fuel efficient vehicles and EVs in the country. “A
capital investment of Rs 5.54 trillion in developing road infrastructure around
the country is expected to boost the sales and demand for commercial vehicles
giving some relief to the auto sector. But increasing customs duties on some
auto parts to 15% will put more pressure on the already struggling auto
manufacturing sector of the country. Auto industry has always been a key
contributor to India’s economic growth and job creation. We expected the Union
Budget to be a game-changer for the worst-hit auto sector. In the near future,
we have high hopes from the government to encourage the startup ecosystem for
new consumer trends such as used car leasing, car rental, car subscription
models etc. which are going to be the promising industries of the future and
can boost the growth of Indian auto sector,” he said.
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