Excise your mind

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So, we are in for some really good times with small cars in 2010 and 2011. Toyota, Honda, Nissan, VW (am just back after VW's shock price announcement on the Polo), Ford, Renault and Bajaj will make their first big and serious attempt at taking a crack at the small car market where players like Maruti, Hyundai, Tata and Chevrolet are well entrenched. Everyone is doing their bit to be in this space and the market looks all ready to explode. But somehow, our excise duty structure for small cars is starting to make little sense


You see, most car manufacturers design hatchbacks not only for India, but for other markets as well. At times India is just one of the markets from where data is drawn. So most of them have to design a petrol engine less than 1200cc, a sub-1500cc diesel engine and it ends up measuring less than 4 metres. But somehow, in the process we seem to be getting denied some of the cars and tech that other markets enjoy.

A whole bunch of hatchbacks like the Ford Focus, VW Golf, Honda Civic hatchback and the Nissan Tiida could be sold here, but can't. Either because of their external dimensions or their engine capacities or both. Am not debating on the final price tag that these cars might sport or their relevance even if somehow they did get an excise benefit, but it means you and me are being denied cars simply because the current rules don't allow for it. And these rules, even though set in stone in 2005 are already seeming out of place simply because car manufacturing has changed rather drastically in the intervening period.

Today, most of these cars come with at least one 'green' option, such as the Focus TDe or the Golf Bluemotion. They have fuel-efficient engines and have aero bits and tyres that reduce drag, thus making them cleaner too. A whole bunch of hybrids like the Prius too could come cheaper if excise duty was based on two factors - fuel efficiency and C02/NoX ratings. So hypothetically if a hatchback were to deliver a fuel efficiency of over 15 kpl and a C02 rating of under 140 g/km, I don't see why the government should not give the car an excise duty benefit. In fact, with the government proposing BEE labelling on all cars, I believe that a car with 5 stars should get excise benefit anyway, simply because it is kinder to the environment and is helping curb the oil deficit.

Also, the government should seriously consider giving small cars running on alternative tech an even higher excise duty benefit than small cars running on pure IC engines. That would make cars like the upcoming Reva NXG/NXR, Chevrolet eSpark and Tata Indica electric a viable option to end buyers who will have to anyway shell out a premium for the technology and lessen the impact on their wallet. To take it a step further, if the government can give an excise duty holiday for manufacturers for the first three or five years, it will encourage more of them to jump on to the bandwagon. Will the 2010 Union Budget, come February 28, radically change the auto industry or will the cash-strapped government figure out more ways of filling its coffers? I hope it's the former rather than the latter.

PS: I've just learnt that the government of Thailand has initiated an 'Eco car programme', where Euro IV cars under 1300cc that deliver 20 kpl and have CO2 ratings under 120 g/km will enjoy tax sops and excise benefits from the government. In fact our very own Tata Nano and the upcoming Nissan Micra are vying for the same space. Seems like at least one government has already got the hint.