In a very surprising move by the government, the excise duty benefits which had so far been making your automobiles cheaper will be revoked from January 1, 2015. Introduced originally by the Manmohan Singh government towards the end of their tenure, the reduced excise duties provided that much needed push to the automobile sector.
Current government had earlier in June decided to extend the subsidy till December 31, 2014 to continue the support to the automotive sector which has shown signs of improvement but is still recovering from the slowdown.
More surprising is the fact that this decision was taken when car sales were weak in the generally-fast festive season. For the past few weeks the question of whether the excise duty benefit will continue or not had been a constant topic of debate everywhere. A move like this in times of uncertainty is surely not a move which will be appreciated!
Crude oil prices are at 5 year low, a chance which the government has taken to increase excise duty on petrol and diesel twice during the last two months (which would have otherwise resulted in at least 2 further price cuts on these fuels). This increased excise duty on fuel will in itself serve as additional revenue to the government and hence they should have continued with the reduced excise duties on cars until the sentiments were all bright and positive!
The double blow comes to the end consumer since many manufacturers had already announced price hikes owing to increased input costs and depreciating rupee! Manufacturers have been requesting the government not to revoke the subsidy as doing so would be a regressive move for the automotive industry.
Our thumbs down for this move and brace yourself for a steep price increase on cars…!