Government Departments To Start Buying New Cars Again To Support The Auto Sector

Finance Minister Nirmala Sitharaman has announced lifting the ban on government departments buying new cars for all officials. This comes as a major relief for the Indian auto sector, which is currently going through one of the biggest sales slowdowns ever. The Finance Minister said that the government will now allow its departments to replace their old vehicles with new ones. As an austerity measure, back in 2014, the government had imposed a ban on the purchase of new vehicles for all officials, including replacing old staff vehicles for new ones.

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As an austerity measure, back in 2014, the government had imposed a ban on the purchase of new vehicles for all officials

The official memorandum released on August 6, 2014, said that officials are also allowed to buy new vehicles costing up to Rs. 4.75 lakh, until the old ones complete their required life cycles. Back then, the government had also said that the new vehicles may be purchased only through DGS&D (Directorate General of Supplies and Disposals) rate contract mode. However, now, with the removal of the ban with directly help boost car sales in India.

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As part of its initiative to support the failing auto sector, FM Nirmala Sitharaman also announced that customers can continue to purchase BS4 vehicles right up till the deadline, and will be allowed to ply on the road until the end of their registration period. This means that all BS4 cars and bikes can be used and operated right up to the end of the tenure of their respective registration. Also, the decision to increase the registration and renewal of registration fee of petrol and diesel cars has been pushed till June 2020.

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Furthermore, Sitharaman also said that the transport and finance ministries are working together on a scrappage policy as well, which will be announced soon. This is expected to encourage customers to buy new vehicles, backed-up by government incentives instead of their old vehicles, and thus revive the demand in the already dented sector and arrest the falling sales. However, the decision is yet to be finalised by the Prime Minister's Office (PMO).

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While auto manufacturers have been quite appreciative of the Finance Minister's latest initiatives to help the uplift the auto industry, there's still a lot more than carmakers are expecting from the government. Right at the top of their list is the need to bring down the GST rate on passenger vehicles.