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Stressing upon the need to take immediate steps for arresting the decline in auto sales, Heavy Industries Ministry has said it will soon take up the issue with the Prime Minister and seek stimulus package to revive the sector.
"I would say that we will look at all the ways and means and talk to the Prime Minister and also the Finance Minister (in this regard). There is no reason why we cannot see that auto industry gets a stimulus," Heavy Industries and Public Enterprises Minister Praful Patel said here today.
"Of course, I do understand there is always a resource crunch, but we cannot ignore such an important sector. We must see that the current trend of the last 8 months does not continue further. It must be arrested and the decline must stop," he told reporters after releasing the Indian Electrical Equipment Industry Mission Plan 2012-2022 here.
The event was jointly organised by the Heavy Industries and Public Enterprises Ministry and the Indian Electrical and Electronics Manufacturers Association (IEEMA).
Car sales fell for record eight months in a row in June, declining 9%, as the economic slowdown and low consumer sentiment hit demand. Sales of vehicles across all categories dropped 5.1% to 14,07,767 units in June from 14,83,443 units a year earlier.
It has prompted the Society of Indian Automobile Manufacturers (SIAM) to seek a stimulus package for the automobile sector from the government.
SIAM is looking at a package similar to one given during the 2008-09 downturn, in which excise duty on two-wheelers, small cars and commercial vehicles was reduced to 8%.
Expressing concern over the impact of declining sales on employment, Patel said: "It is also going to lead to a situation where many companies have already started laying off a lot of workers and it should not be allowed to happen."
Earlier this month, Maruti Suzuki India asked 200 contract workers to go on indefinite leave while cutting down diesel engine production. Mahindra & Mahindra said it will halt production for up to eight days across its plants in July to adjust output to market demand.
The automobile industry is one of the largest employers and contributes almost 25% of manufacturing GDP.
Patel said manufacturing activities should be increased in the country, but high interest rates impact the financing of big projects and manufacturing competitiveness.
"We understand that it is difficult for the government to convince RBI to lower interest rates. But definitely due to higher rates, manufacturing competitiveness and new investments have been impacted," Patel said.
"That is why, we need to intervene in (bringing down) high interest rates for big manufacturing projects," he added.
