Highlights:
- The voluntary scrapping scheme for vehicles will be revealed soon
- By March 2022, the government aims to extend the highway network by 8500 km
- The duty on some auto parts would rise from 7.5-10 percent to 15 percent
The Union budget announced for the Financial Year 2021-22 by Finance Minister Nirmala Sitharaman comes with a host of optimistic steps for India’s automotive industry. There is a lot that has been revealed, right from the much-awaited vehicle scrapping policy to the rise in auto component duties.
At the same time, no new announcements have been made concerning a reduction in direct taxation, a reduction in the cessation of compensation, or any attempt to further push for e-mobility by reducing import duties on electric vehicles. And some car manufacturers, particularly those in the luxury car space, were disappointed by that.
Having said that, here are some of the highlights of the automotive industry’s 2021 Union Budget.
Vehicle Scrappage Policy:
For a few years now, the car industry has been calling for a proper vehicle scrappage policy. Finally, Nirmala Sitharaman said that the government would implement a voluntary vehicle scrapping policy to phase out old and unfit vehicles to meet the demands of the stakeholders.
She said that this change would help promote vehicles that are fuel-efficient and environmentally sustainable, thus reducing vehicle emissions and oil import bills. Over the coming months, the Ministry will release more information.
In India, 51 lakh vehicles are currently over 20 years old and 34 lakh vehicles in the country are over 15 years old, according to the proposed Scrappage Policy, and these vehicles have the capacity to be scrapped, thus reducing vehicle emissions by up to 25 per cent. After being recycled, the scrapped vehicles have the ability to provide raw materials.
Expansion of Road Infrastructure:
The increased investment in the construction and expansion of road networks was another big announcement in the 2021 Union Budget. For the Ministry of Road Transport and Highways, which will be used to further construct highways across the country with the goal of extending India’s highway network by 8,500 km by March 2022 and completing an additional 11,000 km of the national corridor, the government has an outlay of about ₹1.18 lakh crore.
In her presentation, Sitharaman said that the highway infrastructure would include a 3500 km corridor in Tamil Nadu. With an investment of ₹65,000 crores, a 1100 km stretch will be built in Kerala, while 675 km will be constructed for ₹95,000 crores in West Bengal. In the next three years, Assam will get 1300 km of highway track under the plan.
Rise in Auto Component Duties:
The government will now also raise the customs duty on some car parts under the new Union Budget. Finance Minister Nirmala Sitharaman has suggested a 7.5-10 percent to 15 percent rise in customs duties on particular auto parts. They can include components such as wiring sets for ignition, safety glass, windscreen wipers, electric lights, clocks for instrument panels, and clocks, defrosters, and demisters.
Although this could be seen as a step to offer a boost to local production, the move would affect the luxury carmakers who import many of these components for their CKD models. Commenting on the decision, Martin Schwenk, Managing Director and CEO of Mercedes-Benz India, said, “The increase in the rise in auto component duties is unexpected in such revival period, and it would increase the cost of production, contributing to higher customer prices.”
