Nearly two decades ago, the Government decided that all multi-utility vehicles would have to weigh over 2,700 kg to qualify for a lower excise duty of 15 per cent.

Those were the days when cars in India were levied a heftier 40 per cent duty and UV makers were quite amused with the new stipulation on weight. “We just added more metal to our vehicles at a time when catalytic converters were being touted as the new tool to keep emissions in check,” recalls an industry veteran. Nothing could have been more ironical.

There was a sense of déjà vu in Budget 2013 when the Government decided that SUVs with a ground clearance of over 170mm would be levied a higher 30 per cent excise duty. The industry is yet to recover from this bizarre ruling. The other criteria for this hike include a length of over four metres and an engine capacity that is over 1.5 litres.

“When roads in India are so bad, it is only natural to have higher ground clearance for SUVs. I just don’t get the logic,” an exasperated company official says. The move has been a big blow for Mahindra & Mahindra, Tata Motors and Toyota.

The companies are fuming because a large portion of their vehicles are meant for the masses who would not take too kindly to a price hike. The Bolero, Sumo and Innova are products in the Rs 8-12 lakh range and this duty hike could hit sales in the coming months.

“We can understand if the Government was targeting luxury SUVs priced at Rs 20-25 lakh which you typically see on Delhi roads. India, however, is about mass products which are the best bet for its rough terrain,” a marketing executive says.

Punishment for performance

SUV manufacturers believe they are being ‘penalised for doing well’ in an otherwise lacklustre market which has seen car sales struggling to keep pace with last year’s levels.

“Is it a crime to outperform the rest? And why are home-grown companies being singled out for punishment in India when they are pampered in other countries?” an official asks.

The news doing the rounds is that a handful of new entrants in the SUV space are now reworking their ground clearance levels for their products scheduled to debut soon. It is the only way they can stay within the original 27 per cent duty bracket and hope to compete in this market.

It is this constant tinkering with policy that has raised the hackles of automakers. “Every year, the Government springs a surprise. It is not easy in an industry where it typically takes 36 months to create a new product,” an R&D official says.

SUVs have been labelled the villains of Indian roads as they make the most of the Government’s diesel subsidy. However, the Government had recently laid out the roadmap to increase the fuel’s price every month as part of a deregulation effort.

“Ground clearance has become the next best tool to justify a hike,” a company executive says, “except that it defies all logic.”

murali.gopalan@thehindu.co.in

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