Home Radical policy changes needed to ensure growth of automotive sector   “The duty and taxation structure that govern the automotive sector need radical changes, not marginal fiddling, said Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, at the Inaugural Session of Annual Convention of Society of Indian Automobile Manufacturers (SIAM), held on 1st September 2004 at New Delhi. While excise had been reduced substantially, it had been more than offset by an increase in road tax. The growth of the automotive industry is linked to several factors of the economy and in order to spur its growth, it is important to look at the economy as a whole. One of the major sectors that require attention is, of course, the road infrastructure in the country, he said. Dr Ahluwalia added that the growth of the trucking business, that is important for the growth of the automotive industry as a whole, has been slower than the rest of the sectors in the industry. He called upon the captains of the automobile industry to address this issue. Speaking on the occasion, Mukesh D Ambani, Chairman and Managing Director of Reliance Industries Limited said, the automotive industry needs to play a major role in “growth with an equitable distribution of wealth”. The potential of the Indian automotive industry is huge as just one in 60 vehicles made in the world was manufactured in India. This should go up to one in 10, he said. “The future of Indian automotive industry is entwined with that of the country,” he observed. With reforms and a shift to a market-driven economy, new opportunities had opened up for the industry and customer expectations had gone up. However, the market economy still had to address the issue of equitable distribution of wealth. India has emerged as a global information technology (IT) superpower. The automotive industry needed to exploit this in terms of providing new services to its customers, vehicle tracking and registration as well as vehicle design and manufacture. Ambani offered that Reliance could partner with the government and the automotive industry to develop suitable solutions. In spite of a rosy picture of growth, the industry faced several challenges today. These included a large but poor road network that merits urgent attention and extremely variable quality of fuel. The automotive industry should foster public-private partnerships to address these issues. Another issue such a partnership would have to deal with was the environmental concerns of the public. People were concerned about road congestion and air pollution – the two important issues that needed to be tackled jointly, he said. In his welcome address, Jagdish Khattar, President of SIAM and Managing Director of Maruti Udyog, pointed to several issues that hampered the growth of the automotive industry. Things, like, issuing driving licences, measuring emissions, enforcing road rules and regional transport offices, were under-regulated and road safety was poorly enforced. There was no apex organization like the national road safety board. Instead, there was a multiplicity of authorities and regulations. There was a need to make governance of the automotive sector transparent. In contrast to poor regulation in the above areas, there was over-regulation in the pricing of automotive fuels. The administered pricing mechanism was responsible for the huge difference in the cost of petrol and diesel and the adulteration of petrol with cheap additives such as kerosene, he said. Khattar pointed out that SIAM had prepared a blueprint entailing an outlay of Rs. 1,700 crore that would enable the automotive industry grow internationally as well as nationally. He added that if these issues were addressed, India would become a global manufacturing hub for automotive components as well as small cars. Even in India, the market penetration of the industry was low, at 7 cars per 1,000 people. These two factors would ensure a bright future for the industry. Madhur Bajaj, Vice President of SIAM and Vice Chairman of Bajaj Auto Ltd, said, the motto of the Olympics “Faster Higher Stronger” should soon become applicable to the Indian automotive industry. Foundation in Place for Global Action Speaking at the Valedictory Session, Santosh Mohan Dev, Minister of State for Heavy Industries and Public Enterprises said that the Indian automobile industry was at an interesting juncture and both challenges and opportunities are immense. The Minister urged Industry to use the strengths of IT, electronics and a large trained manpower and above all a democratic environment. India’s Free Trade (FT) policy has been arrived at after careful study of pattern of imports and exports and present a big opportunity for Indian automobile industry, said Dipak Chatterjee, Secretary, Ministry of Commerce and Industry, while speaking at the Special Plenary Session on “What should drive the Automobile Industry”. Globally, FT agreements are becoming the main way of conducting trade. India is likely to have more in the coming years, he said. Globally countries have signed over 250 trade agreements and 150 are in operation. India has signed an FT agreement with Sri Lanka and the experience has been very good with trade growing from $1.4 bn in the last fiscal to over $2 bn this year. A detailed study shows that it is possible to quadruple trade in 5 years with ASEAN countries, Chatterjee said. Assuring delegates, he said, the government will always consult industry before signing an FT agreement. “We see that goods manufactured in the country are protected. Completely built cars will remain on the negative list. Automobile manufacturers have nothing to worry about.” The Commerce Ministry has asked the Finance Ministry to reduce the cascading effects of taxes to make the industry more competitive, he added. Dhanendra Kumar, Secretary, Ministry of Road Transport and Highways, said that the general growth of the auto industry was indicative of the health of the country’s economy. There is a clear roadmap for emissions and the industry need not worry about unexpected measures from the government. The Government is also preparing a road safety plan along similar lines. He said, other measures such as smart cards and the computerisation of RTOs will make it possible to compile reliable data on vehicle population of the country. Dr Prodipto Ghosh, Secretary, Ministry of Environment and Forests, suggested that the automobile industry should think of ways to augment mass transit systems in order make private vehicle ownership a more pleasurable experience. This will help industry and improve India’s urban environment. Compared to mass transport systems, per passenger kilometer, cars emit twice as much air pollutants as buses and 8 times more than light rail travel. Cars consume 14 times more fuel than buses and 56 times more than rail. They take 5.7 times more road space than buses. Cars lead to 8 times more death by accidents compared to buses and 110 more than rail transit. Passenger transport in urban areas is dominated by commuter traffic. It is 72% of all travel. Worldwide personal automobiles have a high degree of elasticity in relation to income. As this happens, road congestion increase, leading to idling that pushes up fuel consumption, air pollution and the social cost of lost time of commuters. Note: Society of Indian Automobile Manufacturers (SIAM) is a body of automobile manufacturers.