The rapid growth of the domestic car market is turning out to be a money-spinner for the Government. The contribution of the sector in the form of excise duty in 2010-11 went up 26 per cent.

According to a reply in Parliament by the Union Minister for Heavy Industries, Mr Praful Patel, the Government collected Rs 5,001 crore from the sector as excise duty in the previous fiscal, up from Rs 3,958 crore in 2009-10.

Domestic car sales in 2010-11 had gone up a record 30 per cent to around 2 million units, even as the production rose 27 per cent at 2.45 million units.

The revenues from the excise duty on cars went up even though the levy was increased by only 2 per cent in the Union Budget 2010-11, after being reduced by 4 per cent in the 2008 stimulus package.

At present, the excise duty on small cars stands at 10 per cent, while for larger cars it is 22 per cent.

Forex earnings on exports

However, the foreign exchange earned through exports in 2010-11 rose only 5 per cent to Rs 15,276 crore compared to Rs 14,482 crore in 2009-10.

The lower growth was because the main export market of Europe saw a slowdown in sales.

Though the value of total car exports in 2010-11 stood at Rs 7.81 lakh crore, the share of the sector in the total foreign exchange earnings in the same fiscal was 1.95 per cent.