Slowdown may mean 90L less jobs: Auto companies

Crippled by persistent slowdown, the beleaguered auto industry has raised an alarm, saying as many as 90 lakh new jobs may not be created in the sector while projected revenues may fall short by $36 billion.

Society of Indian Automobile Manufacturers (Siam), the lobby group for vehicle manufacturers, has painted a gloomy scenario and is now seeking a relief package from the government to tide over the tough times. Car sales are expected to be in the negative zone for the second year in a row and commercial vehicles have been the worst affected.

Siam has said that the industry requires a series of hand-holding measures that include lower excise duty on vehicles, apart from schemes like fleet modernization by introducing scrappage of older vehicles.

"The automobile industry is going through a really tough time and the government has to step in now," Siam director general Vishnu Mathur told TOI. The industry body has submitted its set of demands to the government for consideration during the vote on account early next year (a full-fledged Budget will not be presented in view of the impending national elections).

The slowdown means the industry will miss the targets of the ambitious Automotive Mission Plan (AMP, 2006-16) - which was unveiled by Prime Minister Manmohan Singh - by a wide margin. Against the $145-billion turnover target envisaged by 2016 in the AMP, the industry is expected to touch $109 billion, a shortfall of $36 billion. Even this could be achieved if the industry bounces back and registers a 10% growth, Siam's presentation to the government said.

A big impact will be on job creation. The AMP had targeted 3.5 crore jobs in the auto sector (direct and indirect) by 2016. However, the slowdown will mean 2.6 crore jobs, a shortfall of 90 lakh.

"The economic slowdown has reduced consumer spending. Also, inflation continues to be high, and this is affecting consumer sentiments," Mathur said. Siam also expressed concern over inclusion of the auto sector in any proposed free-trade agreement (FTA) with the European Union. "The FTA will be detrimental for the Indian auto industry... and should be discouraged."

Mathur said excise duty on small cars should be reduced from 12% to 10%, while bigger vehicles and SUVs should have a flat 24% duty against the existing 27% and 30%.

Under the fleet modernization programme, Siam has been pressing for retirement of old vehicles and replacing them with new fuel-efficient ones. It said there should be incentives for purchase of a vehicle against retirement in form of lower excise duty and sales tax. These benefits will be passed on to the buyers.