Present Crisis of Auto Sector

Will the government be able to pursue GST Council to agree for a cut in the rate of GST for auto sector from 28% to 18% as demanded by the auto manufacturers of the country? If not, what will be extent of cut and will it help auto sector to restrict the falling sales, rejuvenate the market and restore its past growth rate? How much of loss of tax collection can be afforded by the government? But many view thar the rate rate cut may not necessarily boost the sales figure.Even if it happens, it will be short lived. To remind the readers, the GST rates fixed for auto sector for different types of vehicles were significantly lower than the total of different taxes that were being paid by the auto manufacturers then.But strangely,there is hardly any authentic study about the gradual and continuing slow down of the sector during last so many months. SIAM or CII would have done it, but have not. Shri R C Bhargav, the old man of Maruti Suzuki, views the reluctant banks providing loans to the buyers and the mandate to introduce costly safety features such as airbags and ABS on new cars are two main reasons for the increase in the cost of entry cars as the reasons for the increased price by around Rs. 55000 including around Rs. 20,000 through higher road tax imposed by some states.

Interestingly, Manmohan Singh for the first time beside criticising the government has come out with his five- point remedy plan. And the experts in government must look into the possibility of rational steps, if possible. But unfortunately, the OEMs who know the reasons of slowdown best and some long term solutions too, have not volunteered to announce the steps they must take on their own. I can point to at least one very important reason of increased cost of car manufacturing. That is because of the diminishing interest and zeal of the OEMs in investing for increasing the indigenous content in the vehicles and over the years almost every manufacturer would have increased the import content of components in all new models introduced. I have not heard of any such effort from the auto component sectors. Our OEMs have tasted the ease of importing everything from China that was not the way it was there before liberalisation. OEMs are also not exploring the possibility of exports to its best potentials.

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