Auto sector seeks financial package from government; suggests GST rate cut on cars, easy finance

Forced to cut down production in the face of falling sales, automakers have urged the government for a relief package to boost consumer sentiment. In a meeting with Finance Minister Nirmala Sitharaman, the industry captains on Wednesday suggested to reduce GST on cars from 28 per cent to 18 per cent, ease financing and bring out a scrappage policy among some of the key steps to revive the sector.

R.C. Bhargava, Chairman of largest carmaker Maruti Suzuki, said that industry had put forward the situation as government wanted to understand what is happening. "It was explained to the government," Bhargava told IANS without elaborating on the specific demands made by the auto sector.

As per industry sources, automakers told the Finance Minister about job losses due to scaling down of production and closure of dealerships across the country. Auto ancillary firms have also laid off temporary workers in the wake of sliding demand.

Maruti is learnt to have sent home over a thousand temporary workers in the last few months with crisis deepening by the day. The top carmaker witnessed 36 per cent decline in its monthly sales during July, 2019.

Figures from the Society of Indian Automobile Manufacturers (SIAM) showed that domestic passenger car sales in June went down by 24.07 per cent to 139,628 units.

In the commercial vehicle segment, domestic sales were down by 12.27 per cent to 70,771 units last month.

The overall sales of two-wheelers, which include scooters, motorcycles and mopeds, edged lower by 11.69 per cent to 1,649,477 units.

In all, the total sales of the Indian automobile sector declined by 12.34 per cent during June 2019 to 1,997,952 units across segments and categories.

Given that automobile is one of the key employers in the manufacturing sector, a continued slowdown means big impact on country`s employment scenario.

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In the recent months, banks have become a little more cautious while lending to the auto dealers fearing non-performing asset (NPAs). This has further dampened the sentiment. In the meeting with Sitharaman, auto industry executives demanded for lower cost of financing.