Govt unveils measures to support auto sector, boost demand

New Delhi: Amid a deepening distress in the auto industry, the government on Friday announced several relief measures, including deferring one-time registration fee, lifting ban on purchase of petrol/diesel vehicles by its departments and allowing higher depreciation, but it remained non-committal on the demand for a reduction in GST rates.

In a bid to help clear rising inventory of BS-IV emission compliant vehicles, it said such vehicles purchased till 31 March 2020 will be allowed to ply till the validity of their registration. This is because the country is to leapfrog to selling only BS-VI emission compliant vehicles from 1 April 2020.

Auto sales in the country have been declining for almost a year now with the passenger vehicles (PVs) segment being the worst hit. Industry estimates suggest that 2 lakh jobs have been cut in the last three months as auto companies and component makers grapple with slow demand.

Finance Minister Nirmala Sitharaman said representatives from the automotive sector had held meetings – both as an industry and individually. “BS-IV vehicles was a big issue. There was a confusion because the government wanted to make an announcement to encourage electric vehicles and electric batteries (production)… BS-IV vehicles, which are purchased up to March 2020 will all remain operational for their entire period of registration,” she told reporters while announcing measures to boost the sagging economic growth.

She added that there was a ‘lot of heartburn’ on registration fee being asked upfront and the government has decided to defer that till June 2020. “…because inventories are stocking up and piling up in car manufacturing companies. Today you get a 15 per cent depreciation on them … all vehicles to increase it to 30 per cent on all vehicles acquired from now till March 2020,” she said.

Besides, the Centre will also lift the ban on purchase of new vehicles for replacing all old vehicles by government departments, and consider various measures including scrappage policy to boost demand, she said. Both electric vehicles (EVs) and Internal Combustion Vehicles (ICVs) will continue to be registered, and the government’s focus will be on setting up of infrastructure for development of ancillaries/components, including batteries for exports.

Also, the minister said the government will consider various measures including scrappage policy. Leaders from the Indian auto industry had asked the government for a stimulus package, including GST reduction on vehicles from 28 per cent to 18 per cent, for the sector which has been hit by an unprecedented slump in sales.

As per SIAM figures, vehicle wholesale across all the categories declined by 12.35 per cent to 60,85,406 units in April-June against 69,42,742 units in same period of last year. The Federation of Automobile Dealers Associations (FADA) has stated that nearly two lakh jobs have been cut in the last three months due to the slowdown.

The auto industry had presented factors such as issues regarding availability and affordability of financing, increasing cost of acquisition of vehicles and change in axle load capacity for commercial vehicles that have hurt demand. The industry had also asked the government to bring quickly an incentive-based scrappage policy to replace old and polluting vehicles which can help accelerate demand for new vehicles.