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Current downturn in auto sector cyclical; govt taking steps to support sector

20 Nov 2019 Evaluate

Terming the current downturn in the automobile sector as cyclical, Minister of Heavy Industries and Public Enterprises Prakash Javadekar said that the government is taking various steps including release of funds worth Rs 70,000 crore to the public sector banks to help the sector. He also said the sector is facing a prolonged downturn due to various reasons, including reduction in finance availability and increase in cost due to upfront collection of insurance premium.

The minister noted that there is a cyclical slowdown across sectors including automotive sector since last few months. But, he said the festival season demand has shown year-on-year growth of 0.3 percent in the passenger vehicle segment. Citing reasons for the slowdown, he said increase in axle load limit for commercial vehicles by up to 25 percent expanded freight capacity, leading to shrinkage of new vehicle demand. Besides, increase in collateral for dealers from 25 percent to 60 percent resulted in reduction in inventory finance to dealers. Further, he said there has been postponement of purchases in anticipation of discounts by original equipment manufacturers (OEMs) for clearing of stock with BS-IV norms.

Elaborating on the steps being taken to help the sector, Javadekar said the government as a policy maker always attempts to keep and improve momentum of the economy through a package of measures for comprehensive and continued development of the auto sector as and when required. He said the government has taken steps such as reduction in corporate tax to 22 percent, continuation of registration of internal combustion engine vehicles in future. Besides, he said the scrappage policy for auto sector is under consideration of the government.

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