Rs 1,20,000 cr investment at risk, need govt support: SIAM

NEW DELHI: Making an impassioned plea for help, apex auto industry body Society of Indian Automobile Manufacturers (SIAM) has said, over Rs 1,20,000 crore investment could be at risk, putting millions of jobs at stake if the government support is not forthcoming.

Although the auto industry has partially benefited from the government's stimulus packages, SIAM Director General Dilip Chenoy told reporters that over 65 per cent problems faced by industry remained unresolved, specially issues like lower interest rates for vehicle financing and repossession by financial institutions on loan defaults.

"Yes," Chenoy said when asked if the government does not come to rescue, would the over Rs 120,000 crore investments made in the Indian auto sector could go down the drain?
He said between 2007 and 2011, the Indian auto industry was to witness investments to the tune of Rs 80,000 crore, which would have almost doubled the total investment made in the sector so far to about Rs 120,000 crore.

"If you see what has happened in the past two years and going forward the next two years around Rs 80,000 crore of invested has been announced in this sector," he said, adding Rs 40,000 crore has already been invested and the balance Rs 40,000 crore was in the process of being invested.

The investments will double employment in the automotive sector to direct employment of about 7.50 lakh to 10 lakh jobs by March 2011 and indirect employment would be around a crore, he added.

Chenoy said while companies have started laying off casual and temporary workers no permanent employees have been retrenched so far but warned things could get worse if the market didn't improve.

"If the downturn continues further and extends beyond the next three to four months people have to cut productions further and we are going to see pain," he said.

SIAM had predicted creation of an additional 25 million jobs by 2016 in the sector when the Automotive Mission Plan was unveiled in 2007.

Chenoy said if government does not come to the help of the auto industry, not only there would be excess investments and capacities but it would also hurt the competitiveness of the Indian manufacturers, thereby denting the country's aim of becoming a global small car hub.
"In case the economy does not revive, in case we are unable to resolve the financing issue and if the government does not come to the help of the auto industry, you would have excess investment and capacity in the auto industry," he said.

On the competitiveness of the Indian automaker at the current scenario, he said: "There is a broader issue on competitiveness, which could be hurt as investments made at this point of time are made with a minimum of 16-17 per cent rate of interest.
"Competitors in different countries are getting at 0.3 per cent, 0 per cent, 2 per cent in Euro Zone. So investments which come on line at this point of time based on borrowing at this point, we are starting with a disadvantage."

Chenoy said already the commercial vehicles sector is being hit hard by the downturn and is operating at 10 per cent capacity utilisation.

He, however, said there is an opportunity for the Indian auto industry at the tie of crisis.
"For small cars, yes I think there is a tremendous opportunity for industry in India to capitalise on what is happening now," he said adding if the government and the industry could work together and implement the existing Automotive Mission Plan document, India has definitely an increased opportunity to emerge as a global player.

As of now India as a location for manufacturing small cars is very attractive because investments in that segment are already made, he added.
Source : Economic Times (2/1/2009)