Pune's auto parts units seek tax breaks as business slumps

31 Dec 2008


Close on the heels of reports that Tata Motors is laying off up to 3,000 temporary workers at its commercial vehicle unit in Pune, Maharashtra, as sales slump, thousands of small ancillary units have announced a closure for three days.

The 7,000-odd ancillary units in the auto sector in the Pimpri-Chinchwad area have demanded tax reliefs, in what is seen as the latest signs of recessionary trends affecting the top lines of auto units.

These units have demanded exemption in value-added tax (VAT) and excise duties to help them tide over the prevailing situation.

The ancillary units, engaged in the manufacture of various auto components, employ an estimated 150,000 workers.

While Tata Motors' three-day partial closure ends today (31 December), its effects are spilling over to thousands of small ancillary units.

The shutdown halted Tata Motors' commercial vehicle production, but work in the passenger vehicle segment continued normally, company sources said.

The company had earlier announced a similar three-day block closure at the plant during 5-7 December. This takes the total number of days shut to 15 during the calendar year.

This is the first time in a decade that Tata Motors has kept its plant shut for 15 days at a stretch.

Most of the 7,000-odd ancillary units in the Pune-Chinchwad industrial area sell parts or receive orders from Tata Motors and Bajaj and Force Motors Ltd. Many have also expanded capacity with the arrival of the new crop of auto firms like General Motors Corp, Volkswagen AG and Daimler AG.

A slump in demand for both four-wheelers and two-wheelers has made a 25 per cent dent in the business of the ancillary units since October this year.

Production for most auto OEMs (original equipment makers) in the region are down by almost 50-60  per cent and some 50,000-60,000 temporary contract workers with these auto ancillary units have already lost their jobs, industry sources said.

Hurt by high raw material cost and a nosediving of orders, the association estimates a daily loss of up to Rs4 crore from the shutdown.

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