Rationalise taxes on cars: Montek

Planning Commission Deputy Chairman Montek Singh Ahluwalia today said the duty and taxation structure governing the automotive sector needed radical changes, not marginal fiddling.

Ahluwalia, who was speaking at the annual convention of the Society of Indian Automobile Manufacturers (SIAM), said the substantial reduction in excise duty had been more than offset by the increase in the road tax.

As road tax was a state subject, nothing much could be done to correct this anomaly, he said. A more rational policy was needed for robust growth in the automobile industry, he added.

Ahluwalia added that the growth of the trucking business, which was important for the growth of the automotive industry as a whole, had been slower than the rest of the sectors in the industry. He said investments in technology in this segment needed to be hiked.

"The growth of the automotive industry is linked to several factors of the economy and to spur growth it is important to look at the economy as a whole," he said.

Ahluwalia said a major shift towards public transport was needed to ease the congestion in the four metros. The Indian automobile industry produces 6 million two-wheelers and a million passenger cars annually.

SIAM President and Maruti Udyog Ltd Managing Director Jagdish Khattar said the multiplicity of agencies working in the area of road traffic was making Indian roads unsafe. There was a need for an apex body like the National Road Safety Board to guide and co-ordinate efforts on road safety, he added.

"On the one hand, there is inadequate regulation and enforcement, at the same time there is the bane of multiple regulation," Khattar said.

Khattar said despite the cut in taxes on automobiles in the last few years, the rates remain prohibitive.

"The total tax on a passenger car amounts to 54 per cent of its basic price at the factory gate. As much as 35 per cent of what a customer pays for the car today goes as tax to the Union and state governments," he said.

Reliance Industries Chairman Mukesh Ambani said Indian automobile companies must tap the potential unleashed by an estimated demand of about 1.3 billion vehicles by 2030.

"India is among the few countries that are showing a growth rate of 30 per cent in demand for passenger cars and rural markets are on the verge of opening up. While Maruti Udyog had revolutionised the car market, Mahindra & Mahindra had transformed the rural vehicle segment," he said.