Praful Patel demands excise duty sops for regular SUVs

Finance minister P Chidambaram's cabinet colleague, heavy industries minister Praful Patel has sought exemption for utility vehicles such as Mahindra Bolero and Tata Sumo from the 3% additional excise duty proposed in the Budget.

In a letter to the finance minister, Patel has said that the proposal to levy additional duty on sports utility vehicles has led to classification of utility vehicles commonly used in rural and semi-urban areas under this category. Chidambaram had in his budget speech proposed an increase in the excise duty on SUVs to 30% from 27%, reasoning that they occupy greater road and parking space.

"Needless to say neither are these vehicles high-end nor luxurious. In fact, they are a necessity and a compulsion for vehicle owners given the poor rural road network and their lower price band," Patel said in his letter to the finance minister.

The heavy industry ministry has noted that there is no specific definition of SUVs and all such vehicles that have an assessable value of up to 10 lakh should be exempted if imposition of the additional excise duty is entirely unavoidable on account of revenue and subsidised diesel prices.

Patel has also argued that in the light of the negative growth in the auto industry in the current year there is a case for complete withdrawal of the 3% additional excise duty.

According to the Society of Indian Automobile Manufacturers (SIAM), car sales in February saw the steepest monthly decline in 12 years. Car sales declined by 25.71% to 158,513 units, compared with 213,362 units in the year-ago period.

Patel in his letter noted that the auto sector accounts for 22% of manufacturing GDP and is one of the largest employers in the country. "Overall it is expected that the auto industry may have a flat or even negative growth for the current year, which shall be very discouraging and a big setback for achievement of targets set under the Auto Mission plan 2006-16," the minister noted.

The ministry wants the finance minister to announce that the 3% extra excise duty on SUVs will be removed next year given that the diesel rates are being progressively increased and will scale up to market pricing.

Also Read: Budget 2013: Impact on the Auto Sector