SIAM: 30% Environmental Cess Tax will Hamper Investment in Auto Industry

Environmental cess tax will hamper investment in auto industry as it will hugely affect car manufacturers and the ordinary buyers

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According to SIAM (Society of Indian Automobile Manufacturers), the deployment of 30 per cent cess tax will make India an unfavourable destination for foreign as well as local investors. The auto industry’s apex organisation said it will trigger a disruptive picture on the country if the environmental tax comes into effect for diesel cars and SUVs.

The Supreme Court has asked the Delhi Police for an environmental compensation to the tune of up to 30 per cent cess. It will be derived from the original value of the new vehicles sold as a pre-requisite for their registration in the Delhi and NCR region. SIAM has hoped to not to put the ordinary buyers under pressure with the imposing of such a tax while purchasing of vehicles.

Director General of the automobile industry’s authoritative body, Vishnu Mathur, told Economic Times that existing investments from the auto as well as component manufacturers will be affected by a large amount and new investors won’t come forward to put their money in the country expecting returns with the levying of the proposed environmental cess tax.

Car makers have put in hefty sum in the development and production of diesel engines over the last few years. The advantage of the oil burners is that the fuel economy will be high – an important factor for any manufacturer’s survival in the domestic market. Moreover, since the diesel prices are relatively cheaper compared to petrol, customers will certainly have affinity towards buying diesel-powered vehicles.

The trend has led to Indian auto giants rolling more of diesel cars out of their production lines in recent years. But the table has turned over owing to government’s hostility against diesel vehicles as it was set to reduce air pollution by scaling down harmful NOx pollutants. On a bigger picture, many environmental experts suggested that diesel vehicles can’t be single-handedly blamed for causing air contamination.

However, amidst uncertainty revolving over the environmental policy and with the ban of over 2,000cc diesel-engined vehicles in Delhi and NCR, Mathur said “Most investments from companies are frozen right now,”. Toyota’s frustration in this matter is understandable as the Japanese firm complied with government’s policy and recently invested Rs. 1,000 crore in diesel facility.

Instead of banning older vehicles and calling the industry a major pollution creator, the policy makers should look for substantial solutions rather than getting rid of vehicles sticking with all the mandatory regulations, said the Director General of SIAM.

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