Top executives of the country’s leading automobile companies on Thursday reiterated their commitment to move towards newer technologies like electric vehicles, cleaner fuel, greater investments in research and development, but urged the government to first create a stable policy regime that lays down a definite roadmap which is insulated from frequent changes. In short, they demanded a predictable regulatory environment.
Speaking at the annual convention of their industry association, Society of Indian Automobile Manufacturers (SIAM), industry stalwarts expressed their unhappiness at the recent move of the government to approve an ordinance to amend the Goods and Services Tax (GST) (Compensation to States) Act, 2017, to pave the way for increasing the cess on bigger vehicles — more than 4 metres in length and of 1,500 cc engine capacity to 25% from the present 15%.
Once the GST Council decides to increase the cess vehicles manufactured by companies like Mahindra & Mahindra (M&M), Toyota Kirloskar, Mercedes Benz and Skoda, among others, would become costlier. After the roll-out of GST on July 1, these companies had reduced prices of their vehicles in the range of Rs 1-3 lakh, which would have to be reversed once the cess is hiked.
Since the change was not an isolated one but came after a series of changes in the auto sector in the last one-and-a-half years like a ban on sale of diesel vehicles in Delhi NCR, green cess on diesel vehicles, sudden transition to BS-1V from BS-III fuel standards from April this year, etc, the executives clearly sounded exasperated.
Leading from the front was Tata Motors CEO and managing director Guenter Butschek, who minced no words by stating that there is a need to eradicate basic challenges deeply rooted in the overall ecosystem that are accentuated by intermittent regulatory uncertainties if the Indian automobile industry has to realise its true potential.
“What we seek today is a platform to ensure a well-orchestrated, collaborative and participative approach from the government for a policy framework that enables and supports sustainable growth,” he said. Butschek added that “regulatory uncertainties in the face of demonetisation, BS-III to BS-IV transition and GST have caused disruptions in the market”.
Commenting on the issue, Maruti Suzuki India CEO Kenichi Ayukawa said that the government should make a cost-benefit analysis before taking a decision. “In India every penny is stretched. This market can give volumes but is highly cost-sensitive. There should be a stable policy environment,” he said.
Agreeing with them, Pawan Goenka, managing director, M&M, said that any sudden change has an impact on the business and that is a concern in general among the industry.
Sharing similar sentiments, Venu Srinivasan, chairman and managing director of TVS Motor, said that for developing the complete ecosystem for the auto sector, “stable policy is one of the important things we need in the ecosystem… Courts unfortunately coming in and changing the BS-IV introduction created such a great deal of pain for the whole industry.”
Interestingly, NITI Aayog CEO Amitabh Kant agreed with the industry’s complaint when he said that the auto sector, which provides 13 million jobs and accounts for 49% of manufacturing, plays a critical role in the country’s growth and development. “Therefore I am a great believer that the policy regime has to be predictable, it must be consistent and there must be clarity…and government and courts must keep them at arms length,” he said.