Bajaj says need a GST cut, over-regulation killing auto industry

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Rajiv Bajaj, managing director of Bajaj Auto, has sought a temporary reduction in the producer levy on scooters and bikes to help absorb the cost of transitioning to stricter emission norms, arguing that “over-regulation is killing India’s two-wheeler industry” that is among the world’s biggest. Bajaj urged the Centre to consider a temporary reduction in goods and services tax (GST) to 18 per cent for two-three years from 28 per cent as the anticipated 20-25 per cent increase in acquisition cost would deter buyers, affecting the industry’s financial health and viability. He said that a tax cut will cushion the sustained increase in the cost of buying the vehicles, which are now being tuned to comply with BS-VI emission standards. But “the most inimical factor responsible for this state of affairs is ‘over-regulation’ and it is this overregulation that is killing the industry,” Bajaj said.

India’s two-wheeler sales have declined through 2019, mirroring the broader decline in the automotive industry, with analysts attributing the deceleration to higher ownership costs that include additional upfront expenses on insurance. “What purpose is served, by making additional insurance mandatory for everyone, as if people can’t take care of themselves?” asked Bajaj. “This is one thing that the government has to think on our behalf… In a country where we struggle in cities such as Mumbai to ride at 20 kmph, to mandate the anti-lock braking system that costs Rs 7,000 to Rs 10,000 (extra), in my view, is completely over the top.” The market is estimated to have declined by more than 3.14 million units, or 14 per cent, in 2019 to about 18.5 million units. Bike costs have already risen 15 per cent due to increase in insurance costs and inclusion of advanced safety gear, including the antilock braking system, Bajaj said.

With the implementation of BS VI emission norms, price could further climb Rs 8,000 to Rs 10,000 a unit, making the products even more unaffordable. “For electric vehicles, the government has brought down the GST to 5 per cent, but for internal combustion vehicles, it is at 28 per cent. Could they bring it down to, say, 18 per cent at least for a while and then take it back in 2-3-4 years to 28 per cent?” Bajaj said. Given the steep cost increases, Bajaj said vehicle scrappage might have been a better alternative to combat pollution than bringing in the BS-VI emission norms.

“It would be politically very incorrect to say that BS-VI is not the right thing to do, but frankly I want to say it. Because in my view, getting rid of old vehicles through a suitable mechanism would have been much more effective than squeezing out the last bit of emission from BS-IV vehicles,” Bajaj said. Rakesh Sharma, executive director at Bajaj Auto, said that without incentives in the budget, the industry could face two consecutive years of decline FY20 and FY21. “The first two quarters of the next financial year will be very difficult to navigate. Only by the festive season will there be a pick-up, but it won’t be enough to bring the market into positive territory,” Sharma said.

Read More at: https://economictimes.indiatimes.com/markets/stocks/news/bajaj-says-need-a-gst-cut-over-regulation-killing-auto-industry/articleshow/73262441.cms

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