UNION BUDGET 2022-23: INFRA SPENDING IS THE MANTRA TO SUCCESS

SIAM CALLS IT GROWTH-ORIENTED BUDGET: Kenichi Ayukawa, President, SIAM said “SIAM welcomes a growth-oriented budget focused on building long term strength using Investment as the growth lever while maintaining policy stability and inclusivity. The 35% increased Capex outlay, major infrastructure projects like 25,000 km road construction, 100 Cargo terminals, Project GatiShakti, 5G network, optic fibre cable laying and the recent PLI schemes are major positives. Leveraging Biomass and support to ethanol blending for both environment and economy gains could unlock the power of India’s rural economy. Steel price cooling off measures will help the entire manufacturing sector.”

SIAM further noted that the impetus to charging infrastructure and energy storage systems and government support in R&D for clean energy, green mobility and semiconductors will help the auto sector. “We will work with the government for policy on green mobility, special mobility zones and battery swapping. We welcome the message on Ease of Doing Business and look forward to this being observed in spirit by all departments,” said Ayukawa.

ACMA WELCOMES THRUST ON SUSTAINABLE DEVELOPMENT: ACMA, the apex body representing India’s auto component sector, congratulated the Government on the measures announced in the Union Budget especially for the focus on inclusive growth, development of infrastructure & logistics, ease of doing business, enhanced outlay for capital expenditure, impetus to growth &development of MSMEs and skilling& education.

Thanking the Union Finance Minister, Nirmala Sitharaman, SunjayJ Kapur, President ACMA, said, “The blueprint of a digitally enabled,Aatmanirbhar Bharat, coupled with measures that will drive sustainable yet inclusive growth at a rapid pace for the next twenty-five years. These are the bedrock of the proposals announced in the Union Budget 2022-23, as we redefine our economy in a post-pandemic world.”

“Setting the direction for creation of urban fossil fuel free zones, policy for battery swapping and energy as service and incentives for creating a vibrant start-up eco system, India could soon emerge as a fore-runner of green mobility solutions for the world”, added Kapur.

Kapur further mentioned, “ACMA is also delighted by the measures announced for the MSMEs. The auto component industry is dominated by small players and the extension of the ECLGS (Emergency Credit Line Guarantee Scheme) and its cover, revamping and infusion of funds into the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme combined with the Raising and Accelerating MSME Performance (RAMP) program will help the MSMEs stay relevant and competitive”. 

The budget also announced reduction in duty on some commodities such as pig iron, ferro alloys, ferrous products etc. as also on copper and aluminium scrap, and removal of anti-dumping duty on some steel items which will help alleviate the current challenge of availability of raw materials in the automotive sector. That apart, opening of the Defence R&D to private sector will create yet another opportunity for the auto component sector.

FOUNDATION FOR THE NEXT 25 YEARS, SAYS FADA: Vinkesh Gulati, President, Federation of Automobile Dealers Association (FADA) mentioned that the “Union Budget 2022 seeks to lay the foundation for the next 25 years, from India@75 to India@100. With PM's 'Gati Shakti National Master Plan', a Rs 100-lakh crore project for building comprehensive infrastructure in India, it will be a significant step towards path to development. The Budget has attempted to focus on each of the sectors and has also tried to stimulate the economy after the pandemic slowdown. FADA welcomes and supports the Government's efforts & initiatives towards Electric Mobility. There is a clear emphasis on creative, sustainable & innovative business models. Battery Swapping & Energy as a Service (EAAS) will surely help accelerate the transition towards Clean Mobility. The development of special mobility zones for electric vehicles and promoting clean technology for public transport validate government commitment to E-mobility, which would boost confidence in the EV industry in terms of manufacturing, sales, and create a sense of assurance among customers.

The government's plans for developing 25,000 kilometers of new highways will result in a push for infrastructure spending, which will result in an increase in Commercial Vehicle sales, as well as an addition of 2,000 kilometers of road under a new scheme known as 'Kavach' will be an additional benefit to the revival of this segment. With the extension of the ECLG scheme, it is a remarkable move by the government to support the MSME sector coming out of the slowdown caused by pandemics.

Rural India has generally been the key driver for entry level passenger vehicle segment & 2wheeler space. With government plans on 2.3 lakh crore direct payment as MSP to farmers, it will work as a booster for 2Wheeler, Tractor & entry level PV sector sales. However, an additional duty of rupees 2/ litre on unblended fuel from October 2022, could play a spoilsport for the already stressed 2W industry.

TIME TO REAP BENEFITS, FEELS ICRA: Rating agency ICRA said in line with expectations, the automobile sector, especially commercial vehicles (CV) would continue to reap the benefits of the Government’s continued thrust on infrastructure development and capital expenditure across sectors. The Government’s Gati Shakti Programme, encompassing thrust on seven different engines of growth including roads, railways, and multi-modal logistics infrastructure augurs well for the demand for CVs, especially Tipper Trucks. In ICRA’s views, the Government’s effort to mobilize funds through multiple avenues, especially Sovereign Green Bonds besides addressing the inherent bottlenecks to ensure faster execution of infrastructure projects by construction companies will be critical for uplifting the sentiments of the construction equipment segment, including tipper trucks.

The medium and heavy commercial vehicle (M&HCV) truck segment, which has witnessed sharp demand contraction over the past two years, will get support from the increased allocation towards the infrastructure sector. Further, the Government’s focus on climate change and clean mobility through plans to introduce battery swapping policy and standardization of charging infrastructure norms also augur well towards enhancing the penetration of electric buses in key cities.

ELECTRIC VEHICLES: The government focus on promoting electric vehicles, as a means of transportation in the country, was reiterated in the budget. In addition to existing financial incentives under the FAME-II scheme to boost demand and the PLI Schemes for ACC and auto segment focused on EVs and other alternative energy technologies, the Finance minister in the budget announced plans to implement a battery swapping policy and formalize interoperability standards. If implemented efficiently, the same is likely to go a long way in reducing range anxiety with regards to EV adoption while also aiding economies of scale in battery production. The Finance minister also announced plans to further the push for EV penetration in public transport and create special mobility zones for EVs, which should also spur EV demand.  In addition, the inclusion of energy storage in the harmonised List of Infrastructure will facilitate cheaper financing availability to EV battery makers.

AUTOMOTIVE: The Government’s continued focus on rural development and farmer welfare in the budget augurs well to uplift rural sentiments, and thereby remains positive for the tractor and two-wheeler segment. The allocation of Rs. 20,000 crore for road infrastructure projects, is likely to lead to a spillover demand for commercial vehicles and would be a positive for the segment.  The plans to implement a battery swapping policy and formalize interoperability standards, if implemented efficiently, are likely to go a long way in reducing range anxiety with regards to EV adoption while also aiding economies of scale in battery production. The Finance minister also announced plans to further the push for EV penetration in public transport and create special mobility zones for EVs, which should also spur EV demand.

LOGISTICS SECTOR: The PM Gati Shakti Masterplan is expected to provide much needed impetus to the Logistics sector, by enabling higher integration for all modes of transport, thereby improving India’s cost competitiveness globally. It is a transformative approach towards facilitating faster movement of goods and includes 7 engines i.e. roads, railways, ports, airports, mass transport, waterways and logistics infrastructure. The multi-modal connectivity to provide seamless connectivity for movement of goods and services from one mode of transport to another. It is also expected to reduce time and facilitate the last mile connectivity of infrastructure through Rs. 20,000 crore financed by the government to speed up this project. To strengthen the road logistics and supply chain, expressways are expected to be extended by more than 25000km and four multi-modal national parks contracts will be awarded in FY2023. Further, eight remote connectivity roadway projects for over 60 kms to be awarded in FY2022 and FY2023 through PPP mode to enable trade facilitation as well as job creation. Under the Gati Shakti Plan, Railway logistics will also get a boost with development of 100 Cargo Terminals in the next few years,  and 400 new generation Vande Bharat trains. It also aims at developing efficient logistics for small farmers & enterprises and 'One station, one product' concept facilitating supply chain of local products. Further, the focus is also towards developing a unified logistics interface platform to automate and digitalise logistics paperwork. Unified Logistics Interface Platform will enable efficient movement of goods, assist Just-In-Time inventory management, reduce logistics costs and time, and eliminate tedious documentation.