Union Budget 2011: For automobile industry, budget is in neutral gear

The automobile industry Monday appreciated Finance Minister Pranab Mukherjee for not changing excise duty rates and welcomed the tax concessions for environment friendly vehicles. 

"It is a neutral budget for the auto sector. We had expected a hike in the excise duty rates. The tax sops given for electric and hybrid vehicles are a move in the right direction. However necessary infrastructure should be there for these technologies to gain ground," Y.V.S. Vijay Kumar, executive vice president and business head, Hindustan Motors said. 

An industry analyst, preferring anonymity, said: "The tax sops given to the electric vehicles will not make any major impact. It will be for small segment of vehicle." 

While presenting the budget for 2011-12 in the Lok Sabha, Mukherjee said: "The Indian automobile market is the second fastest growing in the world and has shown nearly 30 per cent growth this year. 

"World over, substantial investments are being made in the field of hybrid and electric mobility. To provide green and clean transportation for the masses, National Mission for Hybrid and Electric Vehicles will be launched in collaboration with all stakeholders." 

In order to popularise electric vehicles, Mukherjee proposed full exemption from basic customs duty and a concessional rate of central excise duty of four per cent on batteries imported by manufacturers for the replacement market. 

This is expected to reduce the battery cost when an electric vehicle user goes for replacement of his old battery. 

"Fuel cell or hydrogen cell technology is a promising green technology for the automobile sector. I propose to extend the concessional excise duty of 10 per cent to vehicles based on this technology," Mukherjee said. 

He also said full exemption from basic customs duty and special countervailing duty on specified parts of hybrid vehicles will be given while reducing the excise duty to five per cent from the current 10 per cent to encourage domestic production. 

Mukherjee also proposed to reduce the excise duty to five per cent on manufacture of kits for converting fossil fuel vehicles to hybrid vehicles. 

While scrapping the refund-based excise duty for factory-built ambulances and offering the tax concession outright, Mukherjee extended the refund-based excise duty concession for taxis with a seating capacity up to 13 people including the driver. 

According to Angel Broking , a stock broking firm, the broader measures like increased focus on rural and infrastructure spending would support long-term growth of the auto sector.

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