Union Budget 2011 highlights

There was no announcement specific to the much talked about excise duty structure, but the Union Budget if implemented in letter and spirit will reap benefits for the automobile industry.

The key question on everyone’s mind was whether the Finance Minister would rollback the remainder of the excise duty stimulus or worse, will he impose some tax on diesel vehicles? None of this happened. The absence of any levy of tax on diesel vehicles added to a sigh of relief.

The 30 percent growth in the automobile industry found mention in the Union Budget speech and that may have stopped the FM from announcing any rollback or levy any additional tax as the government wants the automobile industry to sustain its growth momentum.

The FM may not have doled out schemes to make automobile companies cheaper but he definitely made clear about the government’s intent to incentivise those who will participate in the green revolution. The announcements made in the Budget are aimed at making Electric and Hybrid technology cheaper and popular in India.

Hybrid cars manufactured in India will see a excise duty reduction of 5 percent. So, will this make the Scorpio and Bolero Micro Hybrid cheaper? “Not clear yet”, says M&M’s Dr. Goenka as “it is not clear whether all the 3 levels of Hybrid comes under the Budget announcement”.

The FM announced the setting up of a National Mission for Hybrid and Electric vehicles. Karl Slym, President & CEO, GM India says this is “a much more welcome move than just reducing the excise duty of a component”. Slym feels this announcement will help the government to take informed decisions regarding greener technologies which will benefit the industry.

Industry leaders say that the FM’s move to enhance cleaner technology will definitely help them position their products, which are under development, more competitively now.

There are about 13 million vehicles in India currently, and there definitely exists a huge opportunity for solutions that can make these vehicles more fuel efficient and reduce Green House Gas emissions.

The reduction in excise duty on the conversion kits and their parts from 10 per cent to 5 per cent, will enable deeper penetration of hybrid technology by making it more affordable, and encourage the conversion of more fossil fuel-based vehicles into fuel efficient and environment-friendly hybrid vehicles. 

The 2011 Union budget highlights:

- No change in excise duties which comes as a relief to the auto sector. This means excise duty on small cars remains at 10%, large cars and SUVs continue to attract 22% excise duty.

- In a decidedly eco-friendly step, the minister proposed the setting up of a national mission on hybrid vehicles and electric vehicle (EV) as well as special incentives for hybrids if made in India.

- Full exemption from basic customs duty and a concessional rate of Central Excise Duty extended to batteries imported by EV manufacturers.

- Excise duty on LEDs reduced to 5% which should encourage automakers to adopt this technology.

- Concessional Excise Duty of 10% to vehicles based on fuel cell technology.