Excise duty on all cars may be cut to 16%

RUN UP TO BUDGET 2006

Not just small cars, but all automobiles may get excise relief in the Budget with the ministry of heavy industries recommending an across-the-board reduction in the excise duty for automobiles from 24 per cent to 16 per cent, instead of confining the benefit to a few cars.

"We have not made any distinction for small cars and have suggested that the excise duty for all automobiles be brought down to 16 per cent as we feel that the automobile sector has a huge potential for creating employment," Heavy Industries Minister Santosh Mohan Dev told reporters on the sidelines of a meeting of public sector honchos.

The minister said it was up to the finance ministry if it wanted to restrict the excise duty cut to specific sizes of cars in the Budget.

Last September, during the annual meeting of the Society of Indian Automobile Manufacturers, Finance Minister P Chidambaram had said the government would revisit the issue of lowering the excise duty for small cars.

Dev said he was optimistic that the finance ministry would accede to his request for rationalisation of excise duties since Chidambaram had during his pre-Budget interaction with industrialists yesterday indicated that the forthcoming Union Budget would focus on sectors like textiles and automobiles, which had the potential for job creation and value addition.

The minister said his department had also recommended that factories that manufacture automobile components for exports should be declared "virtual special economic zones" in order to provide some fiscal incentives to such exports.

The National Manufacturing Competitiveness Council, whose inputs are expected to be used in the forthcoming Budget, has already identified the automobile sector as an area of focus for the government along with other sectors like textiles, chemicals and pharmaceuticals.