Here's what the automobile sector expects from the Budget.

CEO speak
Venu Srinivasan, CMD, TVS [Get Quote] Motors

"We are not expecting any significant changes in this year's Budget. There would be no change in excise duties as there is a pricing deficit. No favourable changes are expected for the two-wheeler industry as we have not made any proposal"

Chamber-Speak

CII

The weighted deduction of 150 per cent of the expenses incurred on scientific research should be extended for a further period of at least 10 years even after 2012. Small cars, which attract 16 per cent excise duty, should be defined on the basis of the length of 4,000 mm and the criteria based on engine capacity should be removed.

FICCI

Motor vehicles should be treated as capital goods for service providers for the purpose of allowing Modvat credit. The procedure for availing credit should be notified to avoid the cascading effect of taxation.

Export procedure for Nepal and Bhutan should be on a par with other countries. An appropriate procedure should be introduced for exempting from CST (central sales tax) the capital goods that are used in making products for exports.

State of play

Jayaraman Sekar, leader, automotive practice, PricewaterhouseCoopers

With regard to the auto component industry, the main concern is the issue of FTA with Thailand and the proposed FTAs with Asean and other countries including China.

The general import duties have already come down in line with the WTO commitments to a peak level of 10 per cent. This is proposed to be reduced to 7.5 per cent or 5 per cent in the next 2-3 years.

With Asean having a very strong auto component industry and the current cheap imports from China even without the FTA, the local industry will face increased threats and therefore the government should it.

It is pertinent to note that recently, the government imposed anti-dumping duty on truck wheels imported from China. The emphasis should be to create a proper level-playing field in terms of inputs and other infrastructure costs.

Indian automotive industry does not enjoy tax and fiscal incentives like that of certain other developing markets. This should be considered in the form of tax holidays such as are available to IT companies, additional tax incentives for setting up new industrial undertakings, creation of special auto-component parks (SAPs) and other VAT benefits - with a long-term objective of making India a global manufacturing hub.

Design and development activities in the auto industry have largely been carried out of India. The government should consider setting up a huge research and development fund of Rs 1,000 crore (Rs 10 billion) to offer loans at reduced interest rates. The fund should be easily accessible to the industry. This facility will create a greater momentum in making India a manufacturing centre of excellence.

Labour laws and availability adversely impact competitiveness, despite India being a low-labour-cost economy. At present, there are 45 central Acts and 16 associated rules that deal directly with labour. There is a need to streamline and simplify these laws.

Adoption of ITIs by OEMs (original equipment manufacturers) and other auto manufacturers, especially in the context of the deficiency in labour pool and attrition and creation of centres for automotive manufacturing excellence, should be given greater importance.

At present, concerns over environmental and emission standards are not adequately addressed. All vehicles beyond a stipulated age (for example 10 years) should be kept off the road. India should never be allowed to be a dumpyard by permitting cheap import of used vehicles/components. Continued investment in infrastructure should be made.