Auto parts sector seeks more duty cuts

Workers assemble cars at a plant of Honda Siel Cars India Ltd. on the outsk...

India's auto parts industry is hoping for duty concessions on raw materials and an increase in customs duty on imported products in the federal budget in July, industry officials and analysts said.

"From an industry perspective everyone would like customs duties to be lowered as much as possible on the raw material side. That will help the industry to become more cost competitive," said Pankaj Mital, Chief Operating Officer of auto parts maker Motherson Sumi Systems Ltd.

Customs duty on most steel items as well as copper, key imports for auto parts industry, is currently around 5 per cent.

"You have customs duty on the raw materials here, if that is lowered competitiveness of the manufacturing sector will improve," Mital said, adding the government needed to continue with its already-launched reforms for the sector.

The government has already cut excise duties across the board to 8 per cent in February in a move to protect vulnerable industries such as automobiles from the global economic crisis.

Declining domestic market and lower profitability on exports led to falling sales for most auto component makers for much of 2008/09.

The Automotive Component Manufacturer's Association (ACMA) which had asked for a fund for modernisation in the past year, as an incentive to boost investment, has not made public its budget wishlist for 2009.

An industry source, who declined to be named, said the small and medium enterprises would require a technological upgradation fund of around Rs 1000 crore.

Customs duties on imported auto component products should be raised to 10 percent from the existing 7.5 per cent to boost local production, said Arvind Kapur, managing director of Rico Auto Industries Ltd.

"We hope the customs duties (on finished products) are bought up. Because of the recession China and other countries have started dumping components in India. They should take it up to 10 per cent," Kapur added.

However, analysts say, the upcoming budget will not carry any major sops for the industry.

"We are expecting a neutral budget for auto parts industry. We are not expecting any major benefits. Right now looking at the fiscal deficits they (the government) would look at priority sectors first," said Vaishali Jajoo, analyst at Angel Broking.

The federal budget will be presented on July 6.

Check out our updates on Budget

SEARCH