People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 12

March 29, 2009



Automobile Industry Needs  Stimulus Package, Not Bail Out

CPI(M) Polit Bureau member and MP Sitaram Yechury has suggested to the union government that instead of simply offering bail out to auto industry giants, it must extend a stimulus package to the industry with a specific mandate to strengthen the public transport system in the country.

In a letter written to union finance minister Pranab Mukherjee on March 04, 2009, Yechury made a concrete proposal of removing the sanctions on expansion of state transport undertakings and replacing the over-aged vehicles. This would require Rs 38,000 crore, which will not only strengthen the public transport system but also revive the auto industry in general from its present slumber.

Below we give the full text of the letter.

CONSEQUENT to the global economic crisis, the automobile industry in India and abroad is in deep trouble. Sales have come down abnormally, forcing the companies to reduce their working hours. This is evident even in the recently released CSO estimates for the third quarter of 2008-2009 financial year.

In this context, there are demands from the automobile industry for bailing them out. Recent statements from government authorities also indicate that the government is also planning to consider their demand for bailing out automobile industry and working accordingly. In this back ground, I would urge you to strengthen the public transport system and State Transport Undertakings (STUs) by removing the sanctions on expansion of the fleet strength of STUs and infusing capital to that effect. This will not only strengthen the public transport system but also lead to revival of ancillary industries and auto industry as a whole from its current slumber.

According to one estimate, around 30,000 buses owned by several state Road Transport Corporations (RTCs) are over-aged and need to be replaced immediately. Further, an experts committee appointed by the central government observed that the transport sector in India requires 4,02,394 buses by 2006 where as only 1,13,000 buses are owned by STUs presently, a huge short fall of 2,89,394 buses. Even if we consider the proposal to give space to private bus operators to the extent of 35 per cent, leaving out 65 per cent transport space for RTCs, the current fleet strength is not even half of what is required. The RTCs are still falling short of 1,48,556 buses. There is no need to remind you the consequences of this shortage, which is leading to increase in individualised transport system, which is causing several systemic problems such as congestion, increasing number of accidents etc. A point also to be noted here is that, with the expansion of national highway network and strengthening of state highways under National Highway Authority of India, now the government can consider the proposal to strengthen the public transport system proportionately.

If the required number of buses are added to replace the over-aged vehicles, the additional requirement comes to 1,78,556. This will cost around Rs 38,000 crore. I, therefore, request the government of India to expand the parameters of stimulus package and extend the same to auto industry with a specific mandate to strengthen the public transport system. This amount is almost equal to the stimulus package announced on February 24, 2009. This amount is not more than the expenditure being made on two metro railway projects in the country. With this meagre amount the entire people of India will be benefited by better and environment friendly transport facilities. Not only that. This kind of stimulus package will result in

  1. The auto industry, particularly Ashok Leyland, Tata Motors, Eicher and Swaraj Mazda companies being the main chassis providers to State Road Transport Corporations, will benefit out of this stimulus package helping them to meet the current crisis.

  2. The government can ensure the job safety of those workers who are under threat of job loss due to the recession in auto industry.

  3. The strengthening of public transport system, expanding the fleet capacity of RTCs will automatically generate the demand for employment in the public transport sector.

  4. By introducing more number of buses as suggested by the government panel itself, around 8 to 10 lakh unemployed will get direct employment and more number of jobs would be generated through various ancillary industries.

  5. The STUs will come out of crisis, and, in turn the respective state governments will also increase their income through the spurt in motor vehicle taxes, sales taxes etc. At large the entire economy will be galvanised.

Keeping in mind the above advantages, I would request you to consider the proposal on fast track basis and take appropriate steps to materialise these proposals, thus set an example of the effectiveness of stimulus packages over bailout packages.