Budget 2012: Focus on farm sector productivity, not subsidy, says Mahindra & Mahindra

NEW DELHI: Expressing concern over slowdown in industrial sectors connected with agriculture, auto major Mahindra & Mahindra (M&M) today said the government must focus on increasing farm sector productivity rather than increasing subsidies for sustenance in the upcoming Budget.

"In the last 3-4 months, the growth in tractor industry has been very slow. In fact, during the last two months there has been de-growth in the industry", M&M President (President, Automotive & Farm Equipment Sectors) Pawan Goenka said.

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"That's not just for the tractor industry, everything that is connected to agri. There is a concern right now with the farm prices being under pressure," he added.

Calling for a long term solution, Goenka said, "...the focus has to be on increasing productivity rather than increasing subsidies for sustenance" in the upcoming Budget.

Therefore, any focus on mechanisation, water conservation or anything to do with micro irrigation or crop care will have positive impact on the industry and positive longer term impact on rural economy and agriculture, he added.

Goenka said the finance minister will have to do something on the rural side, "whether it is increasing subsidies or some other measure".

Commenting on the proposed 'diesel tax' in the automotive sector, he said: "If there is any tax that comes on diesel vehicles, it will not move demand from diesel to petrol, but it will slow down the industry which has already had a difficult year in 2011".

He further said such a tax can impact some of M&M's expansion plans.

"We may slow down some investments we had planned on the basis of certain assumptions. Thus, we have to wait and see what actually happens to the volume growth," Goenka said.

Opposing the diesel tax, he said: "We are of the view that the government should raise diesel prices to market-based pricing, encourage replacement of petrol by diesel and there by save on oil import bill".

On the prospect of CENVAT being increased by 2 per cent, he said the auto industry was hoping that it will remain the same as 2011 was not best of the year and 2012 also appears to be a difficult year.

"Though we (auto sector) are not expecting to get any stimulus in this Budget because of the current tight fiscal situation, I would hope there is no discouraging factors that come in the Budget such as increase in CENVAT duty," he said.

Goenka said if there were to be any such increase, it would be passed on to consumers immediately.

"Any change in tax rate, whether its CENVAT duty or whether its diesel tax, if it happens, which will be unfortunate, we will have to pass it on. There is absolutely no two ways about it," he said.