Automobile Dealers Association FADA writes letter to PM Narendra Modi

PM Narendra Modi. File Photo.

The current COVID-19 pandemic in the country that has affected human life and the entire economy across the world. Federation of Automobile Dealers Association (FADA) has written to the Prime Minister Narendra Modi citing some challenges faced by the auto industry in India and seeking some favors to help the industry.

FADA draws the attention to 15,000 auto dealers with 25,000 dealerships and over 40 lakh employees all of whom have been affected by the shutdown announced by the PM Office. The letter emphasizes not only on the adverse impact this would have on the auto sector as a whole, but also on banks, insurance companies, component manufacturers and producers of oils, paints, glass, rubber and plastic. The Indian auto industry was already in the doldrums as sales were at an all time low over the past 15-18 months and now this new pandemic has thrown a spanner in the works.

Society of Indian Automobile Association (SIAM) has predicted that auto sales could drop as much as 35 percent in some segments but this will be even higher if some relief is not received. It is also estimated that some automakers may go completely out of business thus affecting the livelihood of lakhs of employees. It has been noted that in the ongoing slowdown as many as 275 dealerships have already shut shop thus leaving several thousand workers out of jobs.

PM Narendra Modi. File Photo.

FADA has hence suggested that the Government of India offers working capital support to the auto industry. It has also asked to reset the clock for the lockdown period for auto dealers and a waiving of interest on all loans from banks and NBFCs for the period of lockdown.

The suggestions also include extension of 4 percent interest subvention subvention/subsidy for working capital/loan requirements to companies for 9 months after the lock down and 20 percent additional overdraft on credit limits for 6 months after opening so as to allow for easier salary disbursement and other overheads. Since COVID-19 is a health pandemic, the salaries for the lock down period should be paid via ESIC.

FADA has also requested the Government to include wholesale and retail trade along with repair of motor vehicles and motorcycles in MSMED Act from 1st April 2020 and to also reduce the GST for a temporary period. The appeal goes on to state that as on date the automotive sector is burdened by a high GST rate of 29-50 percent depending on the category of vehicle while if not reduced, the Government could mull direct benefit to consumers of 3-4 percent interest rate reduction.

FADA has sought an extended depreciation benefit for FY21. These include an attractive incentive based scrappage policy along with a priority sector tag for the auto industry which will help both the retail and wholesale segments in receiving credit support from banks. This priority sector tag could be given for a period of 12 months till the situation normalizes. Read the full letter of FADA to the PM below;

FADA Letter to PM Modi