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Last updated: 10 Sep, 2019  

Car.jack.Thmb.jpg Auto crisis

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Bikky Khosla | 10 Sep, 2019

Automobile sales in August witnessed the sharpest fall in overall sales since Society of Indian Automobile Manufacturers (SIAM) started recording wholesale vehicle sales in 1997-98. Industry data showed on Monday that sales in all segments, including passenger vehicles and two-wheelers, stood at 18,21,490 units last month as against 23,82,436 units in August 2018, a fall of 23.55 percent. These figures clearly show the kind of situation the Indian automobile sector has been going through off late.

The above figures came on the heels of the recent remark -- "What slowdown? New auto entrants with exciting new models are cruising"-- by a top official from the country’s government think-tank. At a time when all major manufacturers from the segment are closing down plants or suspending their production, such a remark is no doubt unfortunate. The first step towards solving a problem is to acknowledge its existence, and fortunately the Centre seems to be aware of the situation.

Recently, Finance Minister Nirmala Sitharaman announced a slew of measures including lifting ban on purchase of vehicles by government departments, and allowing of additional 15 percent depreciation on vehicles acquired from now till March 2020. Last week, it was reported that the central government is open to take the industry's proposal on reducing the GST on automobiles to the GST Council as it meets in Goa on September 20.

No doubt it would be a Hobson's choice for the government. According to an estimate, an across-the-board GST rate cut for the sector from the highest GST slab of 28 percent to 18 percent would lead to GST revenue loss of at least Rs 30,000 crore. No doubt, this amount is massive, but we cannot ignore the fact that lakhs of jobs are at stake. According to SIAM, a million contractual manufacturing jobs are at risk due to this auto sector slowdown, arresting which, therefore, must be a top priority of the Centre.

I invite your opinions.

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