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Business News/ Industry / Manufacturing/  Nothing is going to happen till a new govt is in place: Sutanu Behuria
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Nothing is going to happen till a new govt is in place: Sutanu Behuria

Behuria, secretary in the department of heavy industries, says the outgoing regime has nothing for the auto industry

Sutanu Behuria says it is not just India that is ending the year on a low note. Photo: Ramesh Pathania/MintPremium
Sutanu Behuria says it is not just India that is ending the year on a low note. Photo: Ramesh Pathania/Mint

New Delhi: The auto industry, bleeding under a slowdown and hoping for some government support to get sales back on track, may have to wait a little longer. Sutanu Behuria, secretary in the department of heavy industries, said in an interview that the outgoing regime has nothing for the industry and auto firms will have to wait till a new government is formed after the general election due by May. Behuria also spoke on slowing demand, fleet modernization, electric mobility and General Motors Co.s’ recall issue. Edited excerpts:

We are ending the year on a low note. Passenger car sales may fall for the first time in a decade. Have you taken stock of the situation?

First look at the global situation. It is not just India where you are ending the year on a low note. It’s true all over the world. Particularly in the auto sector, any country reflects the global trends. The question is to look at it relative to what has happened all over the world—whether India is in a better position or not. That is a part of the general decline in world GDP (gross domestic product) and then if you look at India, IMF (International Monetary Fund) is predicting less than 5% rate of growth for India during this financial year. If you are coming down from 10% to 8% and then come down to 5%, it is expected that there will be a fall, particularly in the Indian auto sector.

In India, a car is a luxury item. The elasticity of demand for luxury items is much more than essential items. Given that the elasticity of demand is very high, you will expect a fall. This not something very unusual.

But some global markets such as China and the US have grown. There are green shoots in the UK and Europe as well.

Yeah, signs of recovery are there. But, if you look at their year-on-year figures, they would have also shown a decline. No country has shown a positive figure. Even China would have shown a decline.

Will it be fair to say that external and not internal factors are responsible for this situation?

It is not about being responsible or not. It’s a derived situation from the economic situation. When will you buy a car? It’s a function of income or variety of tastes, etc. The elasticity of car demand with respect to income is high. Our income obviously has fallen. It has not grown. That acceleration is not there. From 7 or 8%, now it has come down to 5%.

You are linking it to the general economic decline. Whether we are responsible for the general economic decline in our country or whether it is partially due to international situation or partially due to what has happened in the country, it is a different issue.

What could be the enabler for the industry?

Frankly, I don’t think any kind of small tax breaks are going to help. I guess there would have been some pick-up due to the good monsoon in the agriculture sector. Some sort of pick-up at that particular point of time would have happened.

As I said, it’s a function of your income, and if you don’t have an income, you are not going to buy a car. I don’t think that people will make a choice between food and a car. They will eat their food first. They are not substitutes.

The industry has proposed a fleet modernization programme. Do you think that has any potential to create demand?

What are you saying by fleet modernization programme? You are saying that if somebody owns a car which is 15 years old, it should be scrapped. Firstly, it is yet to be proven that if a person who has a 15-year-old car and that car is scrapped, what percentage of such people will buy new cars? That’s not yet known. I might have a 15-year-old car, which you scrap, but today my income may not be sufficient to buy a new car. In the long term, scrapping cars may create demand. I don’t think if you scrap 100 cars today, people will buy 100 cars tomorrow. That will not happen.

But, is your ministry working on this?

We are working on this. This has a variety of issues. How do you scrap it? What will you do with the waste? How many years should it be? So there is a committee that is looking into it.

How long should it take to fructify?

It’s hard to say. They are working with the stakeholders. It is not a straightforward case where everybody agrees. There are people who would disagree and may not want a law that wants a running car to be scrapped. There are two sides to the story. Just because the automobile industry wants one particular rule doesn’t mean we will agree.

And you are ruling out any tax breaks as well.

Yes. You must realize that we are almost getting into elections. Nothing is going to happen till a new government is in place. This budget is basically going to be a vote on account. In any case, once the elections are notified, which would be sometime at the end of February or early March, the code of conduct will be in place. So don’t expect any serious policy decisions immediately. If you make an announcement, you have to make a budget provision… and the new government may have a different set of priorities and they may not agree with this.

How long will it take for the Indian economy to improve in general and the auto sector in particular?

If the world economy improves, it will have a positive impact on India as well. There are signs that exports are picking up. Growth of the economy is also influenced by the sentiment. Unfortunately, in the last one-two years, the sentiment has not been very great. We are lucky that we had a good monsoon. I guess after the elections, once a stable government is in place, things will improve. Any change will inevitably bring different sentiment, hopes, aspirations, which may not fructify, but it will be there in the short run.

In the next three months, you can say that nothing much is going to happen. But after that if sentiment improves, which I think it will, then the economy is likely to get better. I don’t see our economy staying at the 4-5% level. I think it should increase gradually.

Is there anything that the auto sector can expect from the government?

Nothing. Because of the elections, they cannot expect anything. They have to wait till the elections are over and a new government is in place.

What is the update on the electric vehicle mission plan?

We have got stuck partly because of the elections. As you know, Delhi also had elections. So the Delhi government in fact had appointed a nodal agency who are supposed to give us a proposal. Ultimately, they would need money and a certain amount of subvention is required. So, they have to estimate how much money they want and they will also give us a plan about setting basic infrastructure in terms of charging facilities, etc. So, they were not in a position to do it because of the elections.

Booz Allen, on behalf of the government and industry, had conducted a study saying 22,500 crore would be required if India wants to sell roughly seven million electric vehicles by 2020.

Now, we are doing it as a pilot in Delhi only. The government has decided that we will start at a pilot level in Delhi and not for the whole country. We will see how it goes. If it fails in Delhi, it is not going to succeed anywhere else. So obviously we will scrap it. The idea certainly is to do it at a national scale, but you certainly don’t want to spend 24,000 crore to find out that it is not working at all.

Last year’s General Motors’ recall of cars was an embarrassment for everybody. Do we get to see some stringent standards being put in place?

Standards have been set. A report has been given to the ministry of transport. They have examined and they are the nodal agency for that. They will announce what needs to be done.

What happens to General Motors? It was selling vehicles with faulty parts for seven years.

It is not that it has not happened anywhere else in the world. It has happened at a lot other places and recalls have taken place. The point is in this case where we failed is our testing procedures. So, those have to be codified and need to be made more rigid so that there is no such lapse. In our certification process, we were not fool-proof and that is what we are strengthening.

Will General Motors face punitive action?

It depends on (whether it is) civil liability or criminal liability. This action, if at all, will not be initiated by us but by the road transport ministry. We have given the report. If an act provides for punitive action, you can take punitive action.

As per the current laws, the penalty would be nominal.

So we have to go by the existing law.

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Published: 05 Feb 2014, 04:12 PM IST
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