Contrary to apprehensions that the proposal to hike customs duty on auto parts to support local manufacturing will actually result in hike of vehicle prices, the government has assured it will have no negative impact for carmakers.
Finance Secretary Ajay Bhushan Pandey said that the customs duty increase on auto components will also "not have any impact on the prices of cars and bikes".
Speaking to news agency ANI, Pandey said, "So this marginal increase is not going to impact or upset this industry's plan. What it will do is that it will promote the domestic manufacturers of auto parts because we want that not only the car is manufactured here but auto parts as well. In order to promote the domestic manufacturing of auto parts, the customs duty on auto parts have been increased marginally so that there is a balance between the interests of the auto manufacturers and auto parts manufacturers."
In the Budget 2021-22, Finance Minister Nirmala Sitharaman proposed increase in customs duty of various parts including ignition wiring sets, safety glass and parts of signalling equipment to 15 per cent with effect from February 2. Sitharaman had said in the budget that a new customs duty structure will be in place by October this year.
Currently, the parts attract customs duty in the range of 7.5-10 per cent.
The government said the changes in basic customs duty is for creating level-playing field for the benefit of micro, small and medium enterprises (MSMEs) and other domestic manufacturers.
Reacting to the proposal in the Union Budget, most of the carmakers has said it is difficult to estimate whether the move will impact the prices.
The auto industry across the world is currently going through a crisis of parts supply. Several carmakers have been forced to scale down production due to chip shortage. In India too, carmakers have been hit by the crisis.
(With inputs from ANI)