Automobile makers decry excise hike
Domestic automobile manufacturers are planning to make a
representation to the government seeking immediate roll back of the five per cent additional excise duty on multiutility vehicles and other levies imposed on the sector in the Union Budget for 1998-99.
"All the auto-makers are presently assessing the total impact of
the Budget on their individual businesses and would next week submit
the memorandum seeking reversal of these duties," Association of
Indian Automobile Manufacturers executive director Rajat
Nandi said in New Delhi.
The increase in excise duty from 25 per cent to 30 per cent on
multiutility vehicles, he said, was unjustified as these
vehicles primarily service the needs of the rural areas and
inter-city tour taxi operators. Such a levy would only further
depress demand, he added.
The industry also objected to the eight per cent special duty on
all imports across the board and the five per cent cut in modvat
credit. He said it would have a spiralling effect in
increasing costs of auto components as well as vehicles
manufactured. This would only further hit the industry which is
presently faced with a major demand crunch.
Already, MUV manufacturers have increased prices of their
vehicles pursuant to the government imposing the five per cent
excise on them. While Maruti increased prices of its Omni and Gypsy models in the range of Rs 6,600 to Rs 12,400, Mahindra and Mahindra
has hiked the prices of its vehicles by Rs 11,200 to Rs 16,800.
Telco has also effected a Rs 10,000 to Rs 30,000 price increase on
its MUV models with immediate effect.
According to industry watchers, the cascading effect of the
duties announced in the Budget would lead to the growth rate in the automobile industry dropping by another 15 to 20 per cent during the current fiscal.
According to industry analysts, the government had taken this
step to plug some loopholes in the earlier duty structure which the
manufacturers were utilising to their benefit.
The government had been charging 40 per cent excise on passenger cars and 25 per cent on MUVs. This concession was given as MUVs were regarded as rural vehicles. But some manufacturers started making vehicles under this classification but marketed them as urban cars even while enjoying the 15 per cent duty benefit.
"The government has just tried to plug this loophole by levying the additional excise on MUVs," the analysts said.
Meanwhile, the automobile industry has also opposed the 10 per cent hike in customs duty on imported engines and engine parts to 30 per cent stating that it would increase input costs.
With the car manufacturers having already announced their price hikes, the two-wheeler manufacturers are not far behind. However,
they are consulting among themselves as the players want the price rise to be at par.
"All the two-wheeler manufacturers are holding discussions among
themselves and would announce their decision shortly. Scooters and bikes, being a very price sensitive product, we want the price hike by all the producers to be almost equal," said Nikhil Nanda, joint managing director of Escorts Yamaha Motor Limited said.
However, it is yet to be seen whether this price rise would kick
the motorcycle prices above the Rs 50,000 mark.
Meanwhile, faced with a recession-hit market, Eicher
Tractors has decided to absorb the entire price hike on its smaller
tractors by way of the eight per cent excise levy and imposition of
import duty on steel and engine components.
However, the eight per cent across the board duty and five per
cent cut in modvat credit would translate to a slight increase in
the prices of the company's larger models, Eicher Tractors Managing Director Ramesh C Jain said in New Delhi.
"The government has imposed an eight per cent excise on tractors below 1800 cc. This, in fact, had been our demand for some time and now that it has come, we have decided not to pass it on to the
customers and totally absorb it," he added.