The Telegraph
Since 1st March, 1999
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Cars to be cheaper

New Delhi, Dec. 27: The auto-industry is set to witness a lowering of car prices if the government accepts the recommendations of the Vijay Kelkar committee on indirect taxes.

The committee has suggested that the excise duty on automobiles be reduced progressively by 4 per cent to the 20 per cent level by 2005-06 from the current level of 32 per cent.

Auto industry analysts said though the excise duty is administered on the basic price of a car, which varies with each firm, the prices on the small car segment should come down by Rs 10,000.

“If it is lowered by 12 per cent then ex-showroom prices are set to come down by 8-9 per cent,” an industry analyst said.

But US-based auto major General Motors said it will be premature to speculate on a possible fall in car prices. “The industry earnestly looks forward to a reduction in both excise duty and customs,” P. Balendran, director-vice-president, corporate affairs, told The Telegraph.

Hindustan Motors said the overall 12 per cent excise rate cut is not by any means small. “The recommendation is definitely a positive one, if it is implemented,” said B. K. Chaturvedi, president and executive director of the firm.

The country’s largest auto-maker, Maruti Udyog said it will pass on the benefit to the consumers. “For a 4 per cent reduction of prices in Maruti base model, prices will be lowered by Rs 10,000. So the model which costs Rs 2.21 lakh will now cost Rs 2.11 lakh,” said Arun Arora, the firm’s spokesman.

One factor that could upset all these calculations would be the rising prices of inputs, especially steel which has been rising all through this year. Steelmaker Tata Steel is bracing for a fresh round of price rise in the new year which could offset, if not pare, the extent of overall price cuts.

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