FADA President's Message July 2004 Budget Blues Deshnidhi Kasliwal, President Dear friends, The Union Budget 2004 has been presented by the Union Finance Minister. The FM, a liberal and votary of economic reforms to the core, had to do a tight rope walking given the limited option he had due to pulls and pressures from various coalition partners. The budget, in nutshell, is a great balancing act on the part of Finance Minister. We, in industry and trade, have to learn to get used to the coalition politics resulting from the growing regional aspirations. The budget does not contain any specific measures aiming to promote the automotive industry and to remove impediments in its growth path, except for relaxing the conditions for ambulances qualifying for confessional duty of 16%, allowing 150% weighted deduction for in-house R & D and exempting the tractors from payment of excise duty. However, there is no gainsaying that the Budget places emphasis on agriculture and rural sectors in keeping with the NCMP. Huge budgetary allocations for various schemes in these sectors coupled with the significant increase in funds earmarked for defence, improvement and development of port facilities and infrastructure for tourism industry are likely to act as stimulus for overall economic development, benefiting automotive business as well. Raising the income tax exemption limit to rupees one lakh is a welcome step. However, keeping the existing the income tax slabs in tact is not going to benefit the middle - income groups, who predominantly go in for personalized two- wheelers and passenger cars. I, therefore, do not think that this measure is going to help the automotive industry in any significant way. On the flip side, the service tax, which has been a major cause of concern for automobile dealers, has been raised from 8% to 10% and 13 new services have been added to the service tax net. In addition, 2% education cess has been levied on all central taxes, including income tax, excise duty, customs duty and service tax. All this is going to increase the costs and consequently reduce the people's spending on consumer durable. Interest rates are set to remain at the existing levels and, rather, likely to move upwards, which is not good sign. The rising steel prices is another cause of concern. While the reduction is customer duty on steel by 5 percentage points is a positives step, the increase in excise duty from 8% to 12% - though not affecting the automotive industry since it is modvatable - is likely to lead to inflationary pressures in general. We expected the Government to bring the excise duty on passenger cars down to 16% at par with other motor vehicles. This would have given a further impetus to the passenger car industry, which has performed reasonably well in turn would have given a big boost to the auto component and tyre industries, particularly when these two sector have turned in an impressive export performance and need further encouragement to compete against the best in the world. Insurance companies, finance companies and banks would have also stood to gain, along with authorized workshop and service stations. Needles to mention, passenger car industry has been the engine of growth of many developed economies and need to be looked at not from the narrow perspective of revenue collections but as a spearhead of overall industrial activity, technology up gradation and economy as a whole. As regards FADA's activities during the month, we had a meeting with Brijmohan Lall Ji, Chairman, Hero Honda Motors Ltd to exchange views and to seek his message for the automobile dealers. The fact that Hero Honda has surpassed all sales records in two wheeler market speaks volumes of his vision. He set out to make 4 - stroke motorcycles in early eighties, when small 4 - stroke engine for a 2- wheeler was a rarity and had not tested the waters in India. Today, Hero Honda is a number one company in the word, thanks to his vision and business acumen. Hats off to Brijmohan Lall Ji. His message is published elsewhere in this issue. We, automobile dealers, are indeed grateful to him for his kindly agreeing to share his thoughts and rich experience through the medium of this Journal. We are sure, his words of wisdom will go a long way in gearing up the automobile dealers to stand up to the current and emerging challenges. Continuing our efforts to strengthen our relation with sister organizations worldwide and draw lessons and learn from the international experience, I along with three other council members of FADA, namely, Binod Agarwal, Vice President; Sumesh Chadha of radiant Toyato, Ludhiana; and Rahul Pagariya, Pagariya Auto Centre, Aurangabad and Jalgaon, visited the office of Retail Motor Industries Federation (RMI) in London and met their office bearers and senior officials on 5th July 2004. Those representing RMI, present at the meeting were: Colin Parlett, President; Eamon Bradley, Chif Executive (UK/USA), Jardine Motors Group; Mathew Carrington, Chief Executive; Sue Robinson, Director of External Affairs; and Graham Coleshill, Director of Legal Services. RMI represents automobile dealers and non- franchisee garages in the UK. Because of its membership strength, RMI has become a force to reckon with in the UK and is consulted by the Government and other on various issues. Block exemption to retail automobile dealership; Continuing as authorized service station even if the franchise is terminated; Freedom to sell dealership to others as a going concern. While your body, i.e. FADA has come a long way since its inception in 1964 and is receiving the increasing recognition and attention of the government, Manufacturers and other connected with automotive business on various matters, we can taken it to greater height with your cooperation and support. I would therefore appeal to my fellow dealers, to come forward to participate in the activities of FADA in a big way and to seek other automobile dealers, who have not enrolled as members of FADA as yet to become members of this August body. I feel that we have not been able to realise our latent strength as an important component and link in automotive business chain and society. One of the other major activities that are being pursued vigorously is the ICICI - FADA co- branded credit card. I have dwelt on this initiative of FADA and some of the features of FADA and some of the features there of have also been published in the previous issues of FADA Journal. Hope, you would have been opportunity in large number. FADA will welcome your comments on any matter of interest to its members. In fact, we count on your suggestion for further strengthening the activities of FADA. With best wishes, Yours sincerely, Deshnidhi Kasliwal President