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FADA requests for a dealership-support package

Team OD  | Updated: April 13, 2020, 08:03 PM IST

Federation of Automobile Dealers Associations, FADA, has written a letter to the prime minister as well as the Finance ministry seeking a relief package to help the automotive dealers around the country to deal with this COVID-19 pandemic that has wreaked havoc globally. FADA claims to have over 25 lakh direct employees across India and provide business to at least 15 lakh more individuals, all of which could be affected if the dealerships are left to fend on their own.

FADA seeks government support in three areas – Working capital management, employee salaries and incentives provided to MSMEs. For working capital, the entire interest for the period of lockdown should be waived off and a four per cent rebate on the interest post lockdown for a period of nine months is being requested. Also, the dealerships should be allowed to draw 20 per cent over their existing overdraft facilities to meet their fixed expenses and salaries.

It is being requested that the salaries of the employees for the period of lockdown be paid through the ESIC contribution as this is a health hazard and the lockdown has been enforced for employee safety. Also, FADA has requested the government to fast-track their application to include dealerships under the ambit of MSMEs so that the enterprises can avail the benefits and incentives provided to the sector.

According to FADA's estimation, even after the lockdown is lifted, the hovering fear of an imminent lockdown will keep buyers away from capital expenditure like cars until a cure/medicine is found. Which means, the automotive industry that has seen more than 10 per cent dip in demand over the past year will dip further and is expected to be as much as 35 per cent. With lower sales and higher costs, it will be difficult for dealerships to sustain such an extended period of slowdown without a stimulus as the one requested.

To improve the demand, FADA has seconded the automotive industry's long-time demand of reducing GST or providing a direct benefit transfer in terms of lower interest rates. Also, the Corporate Depreciation scheme which allowed 25 per cent of written-down-value to be accounted for depreciation should be extended to 2021 and also to individual car buyers to boost private car buying. Adding on, the long-overdue car scrappage policy would incentivise people to get rid of their old cars to buy new cars, thus boosting demand.

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