7 PM | Automotive slump & industrial policy | 1st August, 2019

Context: the national Automotive Mission Plan significance and challenges

Automotive Mission Plan (AMP) 2016-26:

  • AMP is a collective vision of government and the Indian automotive industry on where vehicles, Auto-Components, and Tractor industries should reach over the next ten years in terms of size, contributions to India’s development
  • AMP 2026 also seeks to define the trajectory of evolution of the automotive ecosystem in India including the glide path of specific regulations and policies that govern research, design and technology

The objectives of AMP 2026:

  • Engine of MAKE IN INDIA: the Indian automotive sector likely to contribute in excess of 12% of the country’s GDP and comprise more than of 40% of manufacturing sector.
  • Along with that 13% of excise duty collection of the government. This contribution makes automotive sector will be a prime mover of MAKE IN INDIA INITIATIVE.
  • Skill India: the automotive industry has numerous backward and forward linkages with over two dozen industries across manufacturing and service sectors, across rural and urban India and going to contribute nearly 65million jobs in the next decade
  • Most of the jobs in the Indian Automotive industry involve acquiring specialist skills, so the automotive sector will also be a part of skill India programme to provide needed skills to workforce.
  • Universal sustainable Mobility: AMP 2026 aims to enhance mobility of all people while also addressing the need to minimize the negative externalities like air pollution, global warming and road accidents.
  • Net Exports: AMP 2026 seeks to tap the potential of scale up the exports to the extent of 35-40% of its overall output over the next 10years and become one of the major automotive export hubs of the world
  • MSMEs sector: the rapid growth of the Indian Automotive industry will provide a strong fillip to the MSMEs of the country to across multiple sectors, the development of which is one of Governments principle objectives.
  • Stable policy: given the distinctive contribution of the Indian automotive industry to the socio-economic development of the country, it is imperative that the industry is subjected to comprehensive and stable predictable policy regime

The challenges of Automotive sector in India:

  • Policy initiatives: The key policy initiatives like leapfrogging to BS-VI norms, 100% Electric Vehicles (EVs) by 2030, alternate fuels have posed several challenges in terms of technology up-gradation, investment, affordability, implementation etc., before the Government, industry, regulatory bodies, financial institutions
  • Complete EVs: The proposal for complete electric vehicles is not a panacea for all transport related issues and there are challenges like eco-system functionality and affordability vis-à-vis competing and feasible options available viz. hydrogen fuel cell, methanol, bio-diesel which are economically and ecologically viable.
  • Infrastructure:  There are also challenges in developing charging infrastructure, lithium mining, low cost battery and disposal of discarded lithium batteries. 
  • Judicial pronouncements: there are also challenges emanating from the judicial pronouncements like the automotive industry has recently faced a ban imposed by the Supreme Court of India on the diesel vehicles (>2000cc) in NCR and subsequent lifting the ban but with the levy of 1% EPC on the cost of the vehicle at the time of registration.
  • Rising input cost: Presently, the automotive industry is facing challenge of rising input cost, low capacity utilization, price sensitive consumers. In addition, the industry is also not very clear on issues like the End-of- Life of vehicles, complete methanol economy, other alternate fuels for low carbon transport. Such policy statements reflect instability and unpredictability without any clear and long-term roadmap.
  • Rising imports: India imports 10 times more auto components from China than it exports. The ever growing import of auto components from China pose a threat to local auto components manufacturing ecosystem and will increase India’s already huge trade deficit with China in the coming years. 

Way forward:

  • The automotive sector in India has an edge over other countries in terms of requisite manufacturing infrastructure, low cost labor, rising middle class, increasing demand from the Government sector and rural areas which is consistently adding and supporting the growth of automotive sector to newer heights.
  •  Focus on the rural demand and adapting to the special needs of low cost and robust vehicles will lead automotive growth, economic development and jobs creation in rural areas which is a priority for the Government.
  • The EVs and low carbon transport shall meet the aspirations of people for safe, secure, affordable and pollution free transportation.
  • India being a vast country has a unique transportation mix not seen across the World viz, three wheelers, e-rickshaws, tempos etc. Therefore, India has a distinctive requirement that requires co-existence of all modes of transport as well as all technologies and fuel types as long as they meet the statutory requirements.

Source: https://www.business-standard.com/article/opinion/automotive-slump-industrial-policy-119073101869_1.html.

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