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| India Infoline Sector Reports | Wed, 31-Dec-2003 10:17:38 IST (GMT+5:30) | |
| Automobile - Two Wheelers | ||
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Government Policies Traditionally, GOI has considered the automobile industry as a luxury segment. But realizing the growing importance of two-wheelers with the increasing necessity of personal transportation for the middle class in eighties, priority was given to the sector by favorable foreign policy. This brought about technology revolution to the two-wheelers as Japanese majors entered in technical and financial participation with Indian majors. GOI has a moderate intervention in the operations of two and three-wheeler industry. Excise duty structure, emission control, safety of rider, etc are all policy decisions. The excise duty on two-wheelers, which previously ranged between 10 to 30%, according to the engine capacity was rationalized in 1991-92 budget to only two-categories viz 15% upto 75cc and 25% above 75cc. This mainly affected manufacturers of 100cc category in the early nineties. Since then the excise duty structure for two-wheelers has been left unchanged till 1999. In the 1999-2000 budget, as a result of rationalisation of duty structure the excise duty up to 75cc vehicles was increased to 16% while for those above 75cc decreased to 24%. As a result, scooter prices were reduced by Rs200-400 per vehicle. The same duty regime was continued in the FY2000-01 budget too. The components used for manufacturing two-wheelers are charged an excise duty of 15%. The industry has been asking GOI to reduce this excise duty to 10%. Two and three-wheelers sector was the first to be de-controlled from the clutches of government regulations. This has resulted in the entry of world majors and subsequent in technology and equity participation with Indian players. This has lead to technology revolution for the two-wheelers in 1980's. The regulation of safety of the rider is controlled by state government notifications, these vary in different states. For eg helmets are compulsory for two-wheeler riders in New Delhi and some other states. The same is optional in Maharashtra and Karnataka. The price of the two-wheelers varies across the country due to variation in registration charges, state taxes and octroi levied by states. Automobile emissions are the major pollutants in the environment. To control pollution from automobiles the GOI stipulates emission norms applicable from time to time. The details about emission norms is given in Annexure 1. The GOI wants the automobile industry to achieve a major improvement in emission levels in two steps. The first milestone was achieved by implying stringent norms applicable from April 1, 1996. This conforms to Euro I standards. The second hurdle was set with a dead line of April 1, 2000 which conform to Euro II norms. The GOI controls availability and price of petrol, the fuel for two-wheelers. But with the dismantling of Administered Price Mechanism (APM), the cross subsidy provided by high petrol prices is expected to come down leading to reduction in petrol prices in the country. This will reduce the running cost per km for two-wheelers and have positive impact on demand. The availability of unleaded petrol across the country will be a crucial factor, as catalytic converters (used to confirm Y2K norms) work satisfactorily only under unleaded petrol.
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