Budget and the motoring public

THE Budget 2006, unveiled on December 8 by President Mahinda Rajapakse, contains several provisions with regard to the import and manufacture of motor vehicles.

One of the most praiseworthy and important decisions on the reduction of special excise duty for locally manufactured/assembled cars, three wheelers and motorcycles, provided there is considerable value addition here.

This has long been advocated by local manufacturers and assemblers, whose products have to compete with imported Completely Built Units, which, thanks to the prevailing tax structures, are only a little more expensive or even cheaper. Thus there is little incentive for the motoring public to buy Lankan-made cars.

This should make locally assembled cars cheaper and hence, more affordable. Locally assembled cars such as the Micro Trend are stylish and fully loaded. Chances are that given the lower prices and product appeal, Lankan-made vehicles will become increasingly popular.

Apart from an expected price reduction, the manufacturers will also be driven to source more local components for their vehicles, thus benefitting support industries such as seat/upholstery making and paint manufacture.

Another commendable suggestion is the duty concession granted to honest taxpayers. Those who have paid their dues on time will be granted a 25 per cent concession on all duties/taxes. It will no doubt be an incentive for taxpayers to pay their dues regularly.

However, some top-rung taxpayers would cringe at the upper engine limit - 1.5 litre. The limit should have been at least 2.0 litres, which is generally the lower engine limit of luxury cars.

One has to contrast this with the proposal to provide vehicles at 25 per cent duty (1.5 litre petrol) and 40 per cent duty (diesel) to Government servants. This is commendable, but private sector taxpayers too deserve equal treatment.

On the last occasion when this proposal was implemented, nearly 10,000 cars were imported. A similar volume can be expected this time as well. The imposition of a 1.5 litre engine limit for diesel is also impractical, as diesels generally come in 1.9 litre or higher versions.

The proposal regarding an Export Inspection Certificate for the import of motor vehicles is also commendable. Sri Lanka gets a large number of 'as is' used vehicles from various countries including Japan and Singapore. In some cases, these vehicles have failed mechanical and emissions tests at home.

The Export Inspection Certificate will solve this problem to some extent, but in the long term it is far better to phase off all imports of reconditioned vehicles as several countries in the region have already done.

It is advisable to reduce duties on brand new cars - the long term foreign exchange savings will be considerable as brand new cars need less repairs in the first six years of ownership. The environment will also benefit.

The three wheeler community will benefit through the proposal to reduce tyre duty to 15 per cent. There are more than 100,000 three wheelers around the country. They have become a means of self-employment and an affordable vehicle especially to the rural masses.

Nevertheless, it is lamentable that two-stroke three wheelers continue to be imported and assembled, despite the availability of cleaner, more powerful and more convenient (no need to mix oil with petrol) four-stroke three wheelers. The authorities should encourage buyers to go for four-stroke three wheelers.

The reduction of excise duties will enable more people to buy motorcycles, already the cheapest mode of powered personal transport.

Each new motorcycle (around 90,000 have been registered in a matter of months) means complete independence from the woeful public transport system for at least one individual.

The tyre duties for motorcycles should also be reduced. Again, the purchase and use of two-stroke mopeds, scooters and motorcycles should be discouraged.

As journalists, we heartily endorse the Government's decision to provide duty and VAT free motorcycles to the media community. A large number of journalists, including provincial correspondents, are likely to benefit. We hope the scheme will be extended to cars in the near future.

But the Budget does not include several progressive measures which would have made a real difference.

For example, the motor trade has been clamouring for duty concessions for all-electric and hybrid (electric-gasoline) vehicles. That would have been a correct decision in these days of very high oil prices.

Again, diesel has been treated as a culprit. It makes no sense to block the entry of private diesel vehicles to the country as diesel is exactly what we need to face the situation. Diesel engines have excellent fuel economy and the latest ones are smooth and clean.

In other words, if we had more diesel cars, our fuel bills would have been less because diesels go more miles with the same fuel quantity compared with petrols.

Diesel duties should be reduced to the level of their petrol equivalents to create a level playing field. These are just some of the issues that should receive the attention of authorities.