Pre-Budget: Automakers demand 200% weighted deduction on R&D spend

The automotive industry, including spare part makers, is demanding 200 per cent weighted deduction on R&D as it is gearing up for a major technology leap with ensuing implementation new emission and safety  norms.

With the emerging automotive technology changing the whole industry landscape, auto part makers is under huge pressure to meet investments needed to meet the new norms.

They are now demanding restoration of the 200 per cent deduction on R&D spending, which finance minister Arun Jaitely reduced to 150 per cent in last year's budget.

They say that any investor wanting to invest in product improvement will think twice if the government cannot decide on tax rates. There should be some incentive for meeting new standards that the government prescribe, they point out.

The auto industry is not sure of reaching the new Euro Norms that are due to be in operation in 2020. No automaker of parts maker in the country has planned to achieve the set norms within the next three years. The industry is yet to create specific solutions or technology that is most cost effective based on R&D.

With an increase in the R&D expense to meet the deadlines of the upcoming emission and safety norms, the auto component industry has raised the concern over the reduced incentive on R&D and is hoping to that government will increase the incentive in the next budget session.

The auto component industry in the country is a $40-billion business with $11 billion of that money coming from exports, including shipments to some of the advanced countries such as the US and UK.

With 80 per cent indigenisation even in the new models, the auto component industry has developed the capability to design, develop, test and deliver according to the specification demanded by OEMs.

However, to maintain the tempo with the changing time, the industry needs some handholding in the form of incentives and sops, they point out.