The government is considering another stimulus package for the automobile industry hit by the current economic slowdown.

If approved, the proposal will lead to replacement of about 40,000 buses of state transport corporations (STCs).

According to a SIAM study, 32 state corporations run over 32,000 buses that are over 15 years old and fall under the overage category. These buses were not being replaced because since 1991 the centre had stopped giving capital grants for the STCs to replace the overage buses.

The new stimulus package will allow STCs, to replace a total of over 40,000 buses. All STCs will be given capital incentive of between 50 per cent and 75 per cent for replacing overage buses. These buses will have to be deployed in semi-urban, rural and in hilly areas, SIAM said.

Though these buses are meant for the semi-urban and rural areas, even high-end bus manufacturers like Volvo and Mercedes Benz can bid for the tenders, since individual states are free to decide on the type of buses they will require.

The SIAM study also found out that because of the paucity of buses, over 14-crore roads kilometres have remained uncovered till now.

In the interim Budget on 16 February, finance minister Pranab Mukherjee had announced plans to buy around 15,000 new buses by June to improve urban transport in 63 cities under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).

Commercial vehicle manufacturers expect this to boost growth in the sector by about 10-15 per cent in the next fiscal.

With regard to the JNNURM scheme, some of the STCs have started floating tenders for purchase of buses, which is expected to generate business worth Rs4,000 crore for the automobile industry.

Meanwhile, the auto sector is expected to get Rs3,000 crore to Rs4,000 crore worth of orders if the government approves a plan put forward by the Indian defence forces to procure vehicles to meet their requirements for two years.

Industry upbeat
Ashok Leyland hopes to increase its market share for the sale of inter-city buses from the current 60 per cent, because of its new models with varying seat configurations and enhanced production from its five plants.

RN rao, director sales and marketing, Ashok Leyland, told reporters at the Bus and Special Vehicles Expo 2009, being held at Bangalore, that the company expects to register a growth of between 10 per cent and 15 per cent in 2009-10 because of the centre's stimulus package as well as an expected reversal of the current downtrend.

Tata Motors' head of the bus division Sandeep Kumar said that orders had been booked to supply buses to transport corporations in Uttar Pradesh, Maharashtra and Andhra Pradesh.

Kumar, said he expected stagnant growth for buses during this fiscal, but the next fiscal could see a growth of between 10 per cent and 15 per cent.

Volvo Buses India managing director, Akash Passey, was also enthusiastic of the developments and said that it was good for the industry as a whole during this time of recession.

The total market for all bus models in India is around 65,000 vehicles and the luxury segment has 1,000 buses.

Ashok Leyland increases working days
Meanwhile, Ashok Leyland, which had slashed production to three days at all its six manufacturing units in November 2008 due to slackening demand, has increased the number of working days to five.

The company's decision to increase working days comes after it reported 33-per cent increase in February sales, that stood at 3,245 units compared to 2,444 in January.

The growth will be mainly driven by the government spending on infrastructure projects, including construction of new roads, bridges and on the public transportation system, he had said.

The company has already bagged two such orders worth over Rs690 crore - one for supplying 875 high-end ultra low entry (ULE) buses to Delhi Transport Corporation (DTC),  worth Rs480 crore, and a maintenance contract from DTC valid for 12 years worth Rs710 crore.

The Rs100,000-crore automobile industry accounts for around 2 per cent of gross domestic product and directly employs 450,000 people. The automobile ancillary industry that services it is worth Rs16,300 crore and employs 250,000 people.