New Delhi: In a bid to revive the ailing automobile sector, the Finance Minister Nirmala Sitharaman on Friday announced slew of measures not just to boost sales but also to revive the slowdown in production. Currently, the auto sector has been impacted by a consumption slowdown which is a culmination of several factors such as high goods and services tax (GST) rates, farm distress, stagnant wages and liquidity constraints. Besides, inventory pile-up at the dealership level and stock management of unsold BS-IV vehicles have become a problem for the sector.

However, making it easy for the auto companies, Sitharaman allowed government departments to purchase new vehicles to replace old ones. She further announced that all vehicles purchased till March 31, 2020 shall avail of the benefit of additional depreciation of 15 per cent. It shall increase the higher depreciation on all vehicles to 30 per cent. Furthermore, the minister said that BS IV vehicles purchased till March 31, 2020 shall remain operational for the entire period of their registration.

The government has also lifted the ban on purchase of vehicles by government departments, and allowing additional 15 per cent depreciation on vehicles acquired from now till March 2020. "The Centre will lift the ban on purchase of new vehicles for replacing all old vehicles by government departments, and consider various measures including scrappage policy to boost demand," Sitharaman said.

The minister said the government's focus will be on setting up of infrastructure for development of ancillaries/components, including batteries for exports. Leaders from the Indian auto industry had asked the government for a stimulus package, including GST reduction on vehicles, for the sector which has been hit by an unprecedented slump in sales. The passenger vehicles (PVs) segment has been the worst hit, with sales continuing to decline for almost a year now.

According to a report by SIAM, vehicle wholesale across all the categories declined by 12.35 per cent to 60,85,406 units in April-June against 69,42,742 units in same period of last year.  Federation of Automobile Dealers Associations (FADA) has stated that nearly two lakh jobs have been cut in the last three months due to the slowdown.