Budget 2021-22 for the Automobile and related Sector
Rohit Kumar Parmar Free lance
IES (Retd)
Former Senior Economic Adviser
The Budget 2021-22 has several positive/changes for Automobile and related sector, which are listed/reproduced below, followed by initial comments. The comments will be periodically updated.
I. Announcement of a vehicle scrapping policy
Scrapping Policy
36. We are separately announcing a voluntary vehicle scrapping policy, to phase out old and unfit vehicles. This will help in encouraging fuel efficient, environment friendly vehicles, thereby reducing vehicular pollution and oil import bill. Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles. Details of the scheme will be separately shared by the Ministry.
The scrapping policy is expected to stimulate demand for new vehicles, however, it would impact the vehicle service and spares industry.
II. Announcement of new highways and enhanced allocation for road infrastructure
Roads and Highways Infrastructure
50. More than 13,000 km length of roads, at a cost of Rs. 3.3 lakh crores, has already been awarded under the Rs. 5.35 lakh crores Bharatmala Pariyojana project of which 3,800 kms have been constructed. By March 2022, we would be awarding another 8,500 kms and complete an additional 11,000 kms of national highway corridors.
51. To further augment road infrastructure, more economic corridors are also being planned. Some are:
a. 3,500 km of National Highway works in the state of Tamil Nadu at an investment of Rs. 1.03 lakh crores. These include Madurai-Kollam corridor, Chittoor-Thatchur corridor. Construction will start next year.
b. 1,100 km of National Highway works in the State of Kerala at an investment of Rs. 65,000 crores including 600 km section of Mumbai-Kanyakumari corridor in Kerala.
c. 675 km of highway works in the state of West Bengal at a cost of Rs. 25,000 crores including upgradation of existing road-Kolkata – Siliguri.
d. National Highway works of around Rs. 19,000 crores are currently in progress in the State of Assam. Further works of more than Rs. 34,000 crores covering more than 1300 kms of National Highways will be undertaken in the State in the coming three years.
52. Some of the flagship corridors and other important projects that would see considerable activity in 2021-22 are in Annexure-II.
Annexure II is reproduced below
ANNEXURE-II
Flagship Projects: Roads and Highways
Major Expressways/Corridors
1. Delhi-Mumbai Expressway: Remaining 260 km will be awarded before 31.3.2021.
2. Bengaluru – Chennai Expressway: 278 km will be initiated in the current financial year. Construction will begin in 2021-22
3. Delhi-Dehradun economic corridor: 210 km corridor will be initiated in the current financial year. Construction will begin in 2021-22
4. Kanpur-Lucknow Expressway: 63 km expressway providing an alternate route to NH 27 will be initiated in 2021-22.
5. Chennai – Salem corridor: 277 km expressway will be awarded and construction would start in 2021-22.
6. Raipur-Vishakhapatnam: 464 km passing through Chhattisgarh, Odisha and North Andhra Pradesh will be awarded in the current year. Construction will start in 2021-22.
7. Amritsar-Jamnagar: Construction will commence in 2021-22
8. Delhi –Katra: Construction will commence in 2021-22
Advanced Traffic management system with speed radars, variable message signboards, GPS enabled recovery vans will be installed in all new four and six lane highways.
53. I am also providing an enhanced outlay of Rs. 1,18,101 lakh crores for Ministry of Road Transport and Highways, of which Rs. 1,08,230 crores is for capital, the highest ever.
The references in the Budget Speech 2021-22 are only highlighting performance of road construction, intent of the national highway expansion, without addressing issues of recovery of operating costs, quality, utilization, etc. This is being done keeping in mind the forthcoming state elections.
III. Changes in customs duty on parts
Capital Equipment and Auto Parts
185. There is immense potential in manufacturing heavy capital equipment domestically. We will comprehensively review the rate structure in due course. However, we are revising duty rates on certain items immediately. We propose to withdraw exemptions on tunnel boring machine. It will attract a customs duty of 7.5%; and its parts a duty of 2.5%. We are raising customs duty on certain auto parts to 15% to bring them on par with general rate on auto parts.
Enhancing customs duty would step up the cost of construction of roads, especially in areas that entail tunnelling; and automobiles. It will offer protection to an otherwise competitive automobile industry.
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