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Budget wishlist: Expect no change in duties says SIAM
January, 04th 2012

Automobile association, Society of Indian Automobile Manufacturers (SIAM) will be revising auto sector's forecast for this year on January 10. In an interview to CNBC-TV18, S Sandilya, president of SIAM said, they will also be discussing the outlook for the auto sector.
Rising interest rates and soaring petrol prices have been hurting demand for cars. The demand situation is expected to improve if both these concerns are tackled with. "So, the sentiment could be very positive if RBI does not increase rates and fuel prices dont go up."

Meanwhile, he expects the government to maintain custom and excise duties in the upcoming union budget. "Whatever stimulus the government gave because of which the industry had certain amount of positive signal should not be withdrawn," he added.
Below is the edited transcript of Sandilyas interview with CNBC-TV18. Also watch the accompanying video.
Q: There is a possibility of a reversal as far as the interest rate cycle is concerned and this was auto sector's biggest concern. Do you believe that you may look at the possibility of revising upwards your projections for the auto sector if we were to see a fast rate reversal?

A: We would definitely comeback with our forecast in January. On January 10 we have a press briefing for looking at the revised forecast for this year that is 2011-2012. Hopefully, we will also look at what will be in store for 2012 year as well. We do have a lot of excitement about the auto expo.

We had a press meeting today in the afternoon and a number of people had come over the curtain raiser. We are looking forward to very exciting times because there are 23 countries participating, 1,500 people displaying vehicles or components as the case maybe. It is going to be exciting. The next week is going to be good for the auto industry.

Q: We do expect the RBI to begin easing the monetary cycle. But what is your own expectation? We saw an uptick on the passenger car vehicle side just for December, but that could have been driven largely by promotional schemes that were announced. On the two wheeler side we see genuine pain at the retail end on the two wheeler front and the two wheelers had held up quite nicely. So, what is the mood like within the auto sector in terms of retail demand at this point in time?
A: In terms of retail demand in December promotional schemes have pulled up demand, except for Maruti everybody else has had a growth. However, going forward if RBI does not increase interest rates it softens a little bit and money is available freely for the customers, we should get boost. That is what we are looking forward to in next year.

Only cars have had a problem, two wheelers have stood up in terms of demand and commercial vehicles have done pretty well. So, overall if you look at the auto industry only cars had a bit of a sentimental impact. With number of new launches coming up, next year could be exciting because people will be looking forward to getting new cars and would want to experiment.

So, the sentiment could be very positive if RBI does not increase rates and fuel prices dont go up. That is very critical because petrol prices having gone up also has been pretty bad for the sentimental reasons for the customers not going in for cars at this stage.

Q: One of the big issue worrying the Indian auto industry at this point in time is the negotiations on with the EU for the India-EU FTA. Could you share with us the concerns that SIAM has with regards to the India-EU FTA. Have you been given any assurance by the government that your concerns will be addressed?

A: Yes. Whenever we talk on this subject the ministries do say, we understand the auto industrys perspective and we will respect it. The country wants to improve the manufacturing sector significantly. Auto industry contributes significant part of manufacturing GDP in this country. There has been a automation plan, which says that we will promote manufacturing within the country.

Given that any kind of freeing up of imports of foreign cars, will kill the industry because we dont want the domestic industry, which is focusing on manufacturing to get affected. SIAM is very clear and we have been voicing our concerns. We have been stating very clearly that we should not get into easing up of this as it is custom duty on completely knocked down CKD) rates have been brought down.

That is facilitating foreign companies to step up manufacturing units here, manufacture and sell. Therefore, given all the positive signals that we have done for the industry, we should not get into opening up of completely built units (CBU) market at this current juncture. Even China has put lot of restrictions for import of CBUs. All the countries, which have a large manufacturing base will protect the industry.

Q: We are getting close to the budget, what would be the budget wishlist for the Indian auto sector?
A: We have given our wishlist. But on the face of it, whatever stimulus the government gave because of which the industry had certain amount of positive signal should not be withdrawn. We do expect that customs duty and excise duty rates are kept or maintained at the same level.

We have also looked at the larger cars where the government is having a Rs 15,000 per car additional duty and a substantially higher rate of excise duty. We want that to be brought down to 16%, which is fine but Rs 15,000 extra duty must be now stopped.

We feel that we must get the duty structure amended for the overall industry growth. This is not something which is significant from a revenue generation perspective, but it sends right signals that we are working towards a rationalized structure of excise duty in the country. That is the main contention we have.

The second is the introduction of GST, which is extremely important from a countries overall economic growth. So, we are looking forward to these. Even if it is not getting introduced immediately, some kind of a timetable, roadmap as to when they will introduce it, will be very useful for us from the auto industry perspective.

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