The Hindu : Business : Chidambaram hints at excise cut on cars

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Friday, Sep 02, 2005

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Business

Chidambaram hints at excise cut on cars

Special Correspondent

Auto industry for phasing out old commercial vehicles

IN THE COMPANY OF FM: The Finance Minister, P. Chidambaram, surrounded by captains of auto industry. (From left) Jagdish Khattar, Brijmohan Munjal, Pawan Munjal, Rahul Bajaj and Venu Srinivasan at the annual general meeting of Society of Indian Automobile Manufacturers (SIAM) in New Delhi on Thursday. — Photo: Kamal Narang

NEW DELHI: Finance Minister P. Chidambaram on Thursday hinted at the possibilities of bringing down levies on the automobile sector while asking car-makers to step up investment to fuel growth and employment.

Ruling out a nationwide Goods and Services Tax in near future to substitute excise, service tax and VAT, the Minister, at the annual convention of the Society of Indian Automobile Manufacturers (SIAM), assured the industry that he would look into their demand for a policy for phasing out old commercial vehicles, as also to have a `second look' at the Fringe Benefit Tax rules. He also invited suggestions from industry chambers FICCI, CII, Assocham and others.

Sharing the concerns of the auto industry over high tax rate, Mr. Chidambaram said: "I am aware that cars are classified as a luxurious item like liquor and tobacco. We have to revisit the rate of taxation to keep pace with the developments in the auto industry.''

Indicating that the Government would consider phasing out of old buses and trucks while revisiting the tax structure, he said most commercial vehicles were in a pathetic condition and the commercial vehicles needed upgradation. "We must put an age limit. You must tax them heavily so that they cannot be used,'' he said, decrying the tendency to retain old vehicles even if they were not fit to be run on roads.

"Our trucks are like wine — they become better as they grow older,'' he remarked in a lighter vein. Mr. Chidambaram said the government was committed to ensuring that India remained on a high growth path with 7 per cent growth having become a base and high growth now meant beyond 7 per cent and near 8 per cent.

Though the household savings in India was high, it was not entirely being converted into financial assets and pushing up investments. " If we can double the financial savings, it will give a boost to the economy. This is what we are trying to achieve. Financial sector reforms in pension, insurance and banking are therefore vital," the Minister said. The Government had sought active funding support from the World Bank and the Asian Development Bank for its ambitious road projects.

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