Union Budget 2016 – Cars and SUVs to get more expensive, road network to improve

With the Finance Minister Arun Jaitley presenting the Union Budget 2016-17, we look at how it affects the automotive industry in a few, simple points.

Better roads

Promises are just blatant lies if not fulfilled, but it looks like we’ll get an improved road network. An investment of Rs 55,000 crore has been proposed, while an additional Rs 15,000 crore will be raised by the National Highway Authority of India. The total allocation of funds including that of the Pradhan Mantri Gram Sadak Yojna will be of Rs 97,000 crores.

85 per cent of incomplete projects are said to be put back on track, too. An additional 10,000 km of national highways will be approved in 2016-17, while 50,000 km of rural roads will be upgraded.

Increased prices

With the new budget in effect, new vehicles will be more expensive due to the following:

Infrastructure Cess

It will vary depending on the fuel type/engine capacity. New petrol-, LPG-, and CNG-powered cars will have a 1 per cent Infrastructure Cess imposed on them. This is applicable on sub-four-meter vehicles, with engine sizes not exceeding 1,200 cc.

Diesel vehicles below a certain size (sub-four-meter and engines up to 1,500 cc) will attract a 2.5 per cent of the same.

Larger engined vehicles will have a 4 per cent cess levied on them.

Luxury Cess

If you’re planning to buy a car costlier than Rs 10 lakhs, you’ll have to pay an additional luxury cess of 1 per cent. For instance, if your new car costs Rs 10.1 lakh, you’ll need to pay Rs 10,100 extra.

Better public transport

Private fleet operators will now find public transport sector more welcoming, as FM plans to demolish the ‘permit-raj’. No detailed announcements were made regarding the same, but the FM reassured that necessary amendments in the Motor Vehicle Act will be made.

This should be a great news for newcomers in the segment, as the FM also announced a 100 per cent tax exemption for start-ups for the first three years.

Better R&D in the country

Under the Pradhan Mantri Kaushal Vikas Yojna, a total of 1,500 training centers will be set up. Rs 1,700 crores have been allocated for the same. If implemented properly, it will put an end to the auto-industry’s shortage of skilled workers. This is well in-line with Union Minister for Heavy Industries and Public Enterprises, Mr Anant Geete’s earlier comment that India needs to focus on R&D and new product development.

Photo of the Finance Minister, Mr Arun Jaitley: Source