Budget 2013: FADA’s Wish List

Dear friends,

As I write this message, the presentation of Union Budget 2013 by the Hon’ble Finance Minister is round the corner. There is a palpable excitement and, at the same time, nervousness as to what the Budget is going to bring in for the industry and other sectors of economy, as also the society as a whole that is faced with severe inflation and job uncertainties arising out of the slowing economy.

 

Precursor to the budget presentation is not something to rave about. The economy badly needing a push to drive back to a high-growth trajectory has got a jolt.  After a spate of none-too-flattering reports, here comes a shocker from CSO that the GDP would grow by just 5% this year. The CSO forecast of a decade-low growth rate, bleaker than estimates of the Finance Minister, RBI and scores of economists & experts, has stumped the Government and other stakeholders. It prompted an immediate response from the Finance Ministry to play down the CSO’s number, while others said that the CSO estimates based on the performance of economy during Apr-Nov’12 would, most likely, be revised upwards, as more data come in and the economy is, of late, showing green shoots of revival.

Scourge of economic slowdown, i.e. inflation, high interest rates and low business & consumer sentiment continue to haunt the Indian economy. While inflation (CPI) is stubbornly hovering at high level, there is hardly any significant softening of interest rates despite a 25-bps cut by the apex bank in its last quarterly review of the monetary policy. Investment, as also industrial activity, is yet to show visible improvement. Advance estimates put out by CSO reveal that the industrial production shrank 0.6% during the month of December 2012, much lower than analyst expectations of a 1.2 per cent growth. The contraction in December comes on the top of negative growth of 0.84% in November 2012. The situation on external trade is not comforting either with Europe remaining in economic turmoil.

According to CSO, the economy has largely been dragged down by food grain production that is expected to fall by 2.8% during the year 2012-13 due to erratic monsoon. However, many experts feel that the situation will be salvaged to some extent because Rabi farm production was expected to be good. There is already a talk of wheat production in 2013-14 reaching around the last year’s record of 94 million tonnes.

Commodity prices internationally are climbing down. However, crude oil prices are exhibiting volatility once again and remain a cause of worry. Recent increase in diesel price by Rs. 0.45 and petrol price by Rs. 1.50 can further depress the market and lead to inflationary expectations.

I feel that there are straws in the wind, which inspire confidence. WPI has been showing downward trend of late. The headline inflation fell to 6.62% in January 2013 from 7.18% in December 2012. It is expected to ease further to a moderate level. Tax collections are on the rise and Purchasing Managers’ Index is encouraging. 

Markets can also take comfort from Mr Chidambaram's statement recently that India is likely to post a GDP growth of 5.5% in the current fiscal year, more than the 5% estimate of the Central Statistics Office, as the economy has started showing signs of revival since November.

We, therefore, need a budget that builds on the green shoorts and lifts the mood of industry, market and common man. With economy not doing well and the Government’s fiscal position being what it is, we are not expecting a repeat of Mr Chidamabram’s dream budget in 1997. The least we are expecting is that he will not raise taxes. Additional taxes are going to further dent the auto market, which is witnessing one of the worst performances in the decade. 

Of late, there have been series of reports regarding additional levy on diesel passenger vehicles. The world over, diesel vehicles are increasingly becoming popular, thanks to significant improvement in diesel technology. Diesel is, otherwise, a more thermodynamic efficient fuel. With steady improvement over the years, diesel, as a fuel, has become much cleaner from environment standpoint. Today, diesel vehicles are as good as petrol vehicles in terms of pollution and noise, vibration & harshness. We feel that the remedy lies in correcting the prices of diesel vis-à-vis petrol. It is good to see that the Government has decided to do away with the subsidy on diesel in a phased manner over a period of time.  Since the price correction has already been set in motion, we sincerely hope that there will not be any additional taxes on diesel passenger vehicles. Rather, we expect some positive measures to revive the auto market that has been going through a sluggish spell since the advent of current financial year.

Commercial vehicle segment is the worst affected due to the slowdown in economy with M&HCVs, in particular, registering steep decline in sales. We hope that Hon’ble Finance Minister will come up with a special dispensation for commercial vehicles. Apart from duty reduction, there is an imperative need for higher depreciation, say 60%, in the case of commercial vehicles in the immediate term, as was done a few years earlier.

Plethora of taxes that vary from State to State has been the bugbear of not only auto market but for the business as a whole. We are sanguine that a roadmap for GST that has been in the pipeline for a number of years now would be rolled out in the budget.

The problem for us, in retail automobile trade, is that while Central Government has been rationalising taxes, the State Governments have been increasing taxes in various forms on motor vehicles. Hope, with the introduction of GST, the anomalies and variation in taxes at the State levels would get addressed.

Regarding FADA’s activities, we are eagerly looking forward to our major event, viz. Awards Presentation function for the 4th edition of Automotive Dealership Excellence Awards (ADEA 2012) on 9th March 2013 at Hotel Leela, Mumbai. As announced earlier, a B2B show during the day has also been dovetailed with the awards presentation ceremony. The objective of institution of the awards is three-fold: One, to recognise and reward the outstanding dealership practices; two, to highlight the social work and community service being carried out by the automobile dealer fraternity; and three, to spearhead a movement of all-round excellence in retail automobile trade. I cordially invite all my friends in auto retail and allied businesses to join me at the awards presentation function to applaud and salute the winners.

We have also scheduled a meeting of FADA Council the next day on 10th March 2013, which assumes significance in the light of presentation of Union Budget by the Hon’ble Finance Minister on 28th February 2013. Council will discuss and formulate its view, among other things, on the proposals of Union Budget 2013. 

In the wake of global financial crisis in the late 2008, banks and finance companies have been wary of extending loans for commercial vehicle and two-wheeler purchases. FADA had written to various banks for easing the finance availability to CV and 2-W customers. I am happy to inform that SBI has recently liberalised its scheme, offering incentives to the CV dealers, who source business to the bank for CV finance.

I had talked in my previous columns about the ongoing training & development programme undertaken by FADA jointly with consultants & experts for the benefit of automobile dealers, under the aegis of FADA Academy. One more such programme in the series of programmes to be conducted in various parts of the country is scheduled for 22nd and 23rd February 2013 at Hyderabad. In fact, a calendar of training programmes to be organised in the next three months has already been published in the previous issue of FADA Journal. Hope, my fellow dealers will avail this opportunity and participate in the training progammes in large numbers. In view of the fast changing dynamics of auto retail, the importance of training & development programme cannot be overemphasised.

We, in FADA Council, have a lot on our plate. We are not being complacent about what we set about to achieve and what we have achieved. Rest assured, you will be hearing a lot more as we move along.

I shall welcome your feedback and suggestions.

With best wishes,

Yours sincerely,

Mohan Himatsingka

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