Economy: Auto Sector

Headline : Govt. looking at export sops, GST incentives for auto sector.

Details :

In News

  • The Ministry of Road Transport and Highways has assured government support to the crisis hit auto industry to overcome the current slowdown.
  • It also clarified that the government did not intend to ban ICE (internal combustion engine) powered vehicles.
  • However, the government would promote the use of alternative fuels and electric vehicles to tackle issues of a high crude oil import bill and pollution.

Background

  • The sale of vehicles across categories in the country in July 2019 came down by 18.71%compared to July 2018.
  • The passenger vehicle segment, which comprises cars, utility vehicles and vans, has been one of the worst performing segments.
  • The current fall has been the steepest fall in nearly 19 years.

Impact of the slowdown

  • As car manufacturers are struggling with low sales, the amount of work they give to their vendors and sub-vendors has started falling.
  • For the industrial units, the bigger worry is the repayment of their bank loans to avoid being labelled as a non-performing asset.
  • A lack of working capital amid low demand has led to closure of nearly 300 dealerships across the country.

Loss of jobs

  • This has led to over two lakh people losing their jobs, according to the Federation of Automobile Dealers Associations (FADA), the apex national body of automobile retail industry.
  • The Automotive Component Manufacturers Association of India (ACMA) warned in July that 10 lakh jobs were at risk and urgent action was needed to bring the industry back on track.
  • Work is also drying up for contract labourers, who don’t enjoy the same protections in the workplace that permanent workers do.

Recent measures taken in the auto sector

  • BS-IV cars purchased till March 2020 can remain operational for the entire period of registration.
  • Government departments will replace old vehicles with new ones, in order to boost demand.
  • Higher vehicle registration fee has been deferred to June next year.
  • Depreciation has been increased to 30 per cent for all vehicles purchased till March 2020.

Steps to be taken

  • The industry’s demand for a GST cut is under consideration and will be taken up at the forthcoming GST Council meeting.
  • The Centre is also looking at including export sops to help create demand in the sector.
  • The government is working on a scrappage policy, which will be announced soon.
  • The Ministry of Road Transport and Highways would also award 68 road projects worth about Rs 5 lakh crore in the next three months, which is expected to help generate demand for commercial vehicles.

Section : Economics

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