‘Govt must cut taxes to put auto industry back on track’
3 min read.Updated: 22 Apr 2020, 10:49 PM ISTAmit Panday
To restart production, we need to ensure that our suppliers also start manufacturing at the same time, irrespective of their locations, says Gurpratap Boparai, MD, Skoda Auto Volkswagen India Pvt. Ltd,
The just-ended financial year was tough for India’s automobile industry as its battles a slowing economy, and sluggish demand came to an abrupt end with a nationwide lockdown to curb the covid-19 outbreak. In an interview, Gurpratap Boparai, managing director, Skoda Auto Volkswagen India Pvt. Ltd, shares his views on the impact of the pandemic, and his expectations from the government for reviving demand. Edited excerpts:
How was FY20 for Skoda Auto Volkswagen, and what is your short- and medium-term outlook?
FY20 was a tough year for the whole industry as the economy was grappling with several challenges leading to reduced consumer spending. The fiscal year closed with the nationwide lockdown. April will see no production days as the industry continues to follow the government guidelines. However, we have about 30 people in our Pune plant where we have developed prototypes of some respirators, which are awaiting approvals for production. We are already producing and supplying face shields to hospitals in Aurangabad, Pune and Latur. We are taking all necessary precautions on employee safety. FY21 will be tougher. It is difficult to predict anything as cars are discretionary items and customers tend to spend only on what is absolutely necessary during such times.
Will April be the only month to be written off from the books?
We may not have complete manpower available at work to resume full-fledged operations. For May, we are looking at restoring only 50% of our operations, followed by a similar pattern in June. While we can resume production, the government needs to take measures to ensure demand revival.
How can the demand be revived?
The government should look at reducing taxes across multiple levels for a temporary period. This may involve reducing registration charges, GST (goods and services tax) as well as cess at the state level. The government must adopt revenue-neutral policies that can create more demand in the market and allow the auto industry to come back on track. This will have a positive effect on the economy, too. Similarly, taxes can be reduced on parts and specific raw material. For example, in components, such as catalytic converters, which are critical for compliance with BS-VI emission norms, precious metals such as palladium and rhodium are used. These metals are mostly imported and in the recent budget, the duty was increased from 7% to 15%. This can be rolled back.
The RBI has announced loan moratoriums for three months. Should it be extended?
Yes, but it is not uniform across all banks. The banking system should look at waiving off the interest component during the moratorium period.
Are we staring at a deeper recession this year?
India’s GDP is estimated to have grown 4-4.5% in FY20. While there was no recession last year, we saw economic stress and liquidity issues in the market. However, the virus crisis has only aggravated the situation and because of this lockdown, there will be essentially no business in April. The following months are going to be tough and we are staring at a deeper slowdown. But it depends on the stimulus package to revive the economy.
Are you looking at downsizing company operations or considering job and salary cuts?
No, we have clearly told our employees that no jobs will be cut through this crisis. We won’t resort to salary cuts either. However, what we have done is asked our employees to suggest areas where they think the company can save on cutting unnecessary overheads.
When will Skoda Auto Volkswagen restart its production?
To restart production, we need to ensure that our suppliers also start manufacturing at the same time, irrespective of their locations. There has to be free movement of goods between the vehicle plants to that of the vendors and back, besides smooth access from the plants to the ports. We are ready to start production, but it is imperative that the ancillary and logistics industries are aligned with our requirements.
Many component suppliers and dealers fear shutting down if the crisis continues.