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Old 17th February 2018, 21:02   #1
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Default 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Drawing inspiration from Japanese Kei Car policies since the post-World War II era, India put forth a new regulation sometime in 2008 (IIRC). The excise duty on cars that are sub-4 metres in length, with engine capacity less than 1.2 litres (petrol) or 1.5 litres (diesel) was half (or less) that of cars which exceeded these specifications. Small hatchbacks fitted into this category quite nicely, but the Indian market loves a sedan with a proper boot. This caused a flurry of innovations specific to India, beginning with the Tata Indigo CS and Maruti DZire, with their wafer-thin bumpers and weird body lines (box stuck on to the back of a hatchback).

Understandably, the size rule was introduced with the intent of reducing congestion on our roads, and the smaller displacement engines were thought to be more frugal, saving the country crores in petroleum import bills. Japan, however, had the Kei Car regulations for a different reason - this class of cars was developed to popularize motorization in the postwar era, to promote the growth of the car industry, as well as to offer an alternative delivery method to small business and shop owners.

However, in reality in India, the reduced taxes on small cars saw a flurry of car-buying activity among people over the next decade, just because there were cheap cars available. The smaller engines were not as fuel efficient in real life as they appeared on paper (and in skewed testing methods by ARAI). Both these facts made sure that India did not manage to reduce its petroleum import needs year-on-year. And then there were ridiculous attempts to save on excise duty and make the prices of luxury cars cheaper, such as Toyota installing the 1.4-litre diesel engine in the Corolla, or Maruti powering the Ciaz with a 1.4(P)/1.3L(D) engine.

With the cost of developing any engine being prohibitive, a limited number of small engines have taken on cult status (aka "national engine") over the last decade, with the same engine being tweaked & modified and used in a variety of cars across multiple manufacturers. Limiting the displacement by government regulation therefore effectively strangulates the entry of newer, better engines into India, and leaves people with very few engine choices when buying their cars.

High-tech small engines such as the 1.0-litre EcoBoost never sold in any volume, and in any case, the fuel efficiency of the 1.0L petrol engine was somewhat lower than that of the 1.5L petrol EcoSport. Besides, with a newer regressive regulation, where cars with more than 170 mm of ground clearance are classified as SUVs, even a sub-4m car like the EcoSport does not benefit from the regulations governing small cars.

To sum up:
- The sub-4 metre rule did not reduce congestion on our roads;
- The <1.2L/1.5L engine rule did not improve fuel consumption or fuel import bills;
- Buyers shifted from 2-wheelers to 4-wheelers with rising affordability;
- India-specific small cars were created which do not have any export potential.

So is it time to scrap the rules governing small cars, tax vehicles more rationally and evenly across all segments, and let the Indian automobile industry bring us world-class cars and engines?

Last edited by Aditya : 21st February 2018 at 07:51. Reason: Typo
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Old 17th February 2018, 21:17   #2
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Couldn’t have agreed more. The ‘compact’ segment is a shoddy, amateurish effort by manufacturers in India aided by the silly laws of our government. It’s hurts the eye everytime you look at them.

As explained by you, it’s serves no purpose and has infact turned the plan upside down. Manufacturers always find a way to bring in more profits and our great countrymen gladly accept it.

That being said, Tigor and to an extent the new Dzire are good lookers. I though, won’t settle for sedan/SUV lesser than the size of a C-segment. But hatchbacks? The more compact they are, the better.

Last edited by The Brutailer : 17th February 2018 at 21:21.
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Old 17th February 2018, 22:06   #3
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

For me this was one of the worst rules to have been implemented in the Indian auto industry. The petrol powered cars seems to have been more adversely affected than the diesel powered ones, a 1.2L petrol engine is simply not sufficient for most cars while a 1.5L Diesel is sufficient for most small cars. Cars like the i20 petrol really needs a powerful engine (the 1.2 kappa isn't powerful enough) whereas the diesel i20 is sufficiently powerful. Same theory can also be applied for the likes of Polo, Figo, Etios Liva, Punto (not counting the 1.4L variants).

Also in cars like the old Indica Xeta, the 1.4L petrol engine was known to be more fuel efficient than the 1.2L petrol engine. So, it doesn't necessarily mean that a smaller engine will be more fuel efficient than a slightly larger engine. The petrol variants of some popular premium hatchbacks like the i20, Polo have a power to weight ratio similar to that of my 01 Zen mpfi . Hence most 1.2L petrol powered cars on sale today simply doesn't appeal to the petrol head.

This rule also gave birth to the idea of a Sub 4-metre sedan, I personally wouldn't buy a Sub 4M sedan anytime soon but the sales figure shows otherwise. These things are hideous to look at (in most cases), doesn't have any space & price advantage over their equivalent hatchbacks. The number of full size sedans in the sub 10 lakh range has also decreased significantly in the recent few years, Ford & Tata doesn't have one proper full size sedan in its whole lineup.

Last edited by chiranjitp : 17th February 2018 at 22:11.
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Old 17th February 2018, 23:13   #4
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Quote:
Originally Posted by SS-Traveller View Post
So is it time to scrap the rules governing small cars, tax vehicles more rationally and evenly across all segments, and let the Indian automobile industry bring us world-class cars and engines?
Unfortunately the proposed new tax for greener cars ( not only for electric vehicles but also other relatively-cleaner technologies, such as hybrids, CNG, bio-fuel and methanol as well as fuel cells) too is dependent on the length.

Excerpts from the proposal,

Quote:
Promoting sales of smaller and greener cars is the goal of the proposed GST framework
Quote:
155 gm/km will be used as the cut-off for categorizing vehicles currently
-Cars with length less than 4 meters and CO2 emissions less than 155 gm/km will be eligible for the lowest cess rate of 1%

-Cars with length less than 4 meters but CO2 emissions higher than 155 g/km will have a cess rate of 15%

-Larger cars with length greater than 4 meters and CO2 emissions less than 155 g/km will have a cess rate of 15%.

-the highest cess rate of 27% on cars with length greater than 4 meters and emissions higher than 155 g/km

Source

Last edited by volkman10 : 17th February 2018 at 23:18.
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Old 17th February 2018, 23:15   #5
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

An excellent and controversial subject for a healthy debate. I am actually on the other side. I always thought that maybe we should have had 4 tax segments below 3.6m, 3.6 to 4.0, above 4.0m and a ban above 4.5m. Cars above 4.5 metres in length ought to be not allowed in India. Plus a punitive rate on engine size above 1.5 litres. We have lost perspective on what engine bhp is needed to lug a family of four around at between 20 to 80 kmph - that's the speed range most cars stay in for over 90% of their running time I guess - a few long run enthusiasts and taxis may differ.

Look at cars in the 1960s and early 1970s and you'll find engine outputs of between 45 bhp to 70 bhp legion. My Observers Book of Cars from those years have the data staring in the face. We now think we need 1500 and 2000 and 2500 litre engines which mainly appeal to the ego and the sense of power. I think what GoI did is right. I only regret they didn't do more.
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Old 17th February 2018, 23:17   #6
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Quote:
Originally Posted by SS-Traveller View Post
To sum up:
- The sub-4 metre rule did not reduce congestion on our roads;
It did not go far enough. It made small cars too affordable (among the lowest-priced in the world) and no government paid any attention to public transport.

Quote:
- The <1.2L/1.5L engine rule did not improve fuel consumption or fuel import bills;
Too many small cars, because they are cheap.

Quote:
- Buyers shifted from 2-wheelers to 4-wheelers with rising affordability;
Yes, and that's a bad thing.

Quote:
- India-specific small cars were created which do not have any export potential.
Because foreign countries have better public transport and strong disincentives for cars.

Quote:
So is it time to scrap the rules governing small cars, tax vehicles more rationally and evenly across all segments, and let the Indian automobile industry bring us world-class cars and engines?
It is time to tax all cars brutally. I speak as a car owner who tries to avoid using it (my preferred mode of travel is bicycle, 15+15 km/day, yes it can be done and you don't have to be an athlete to do it, it's actually faster than driving during peak hours).

We need not just taxes at purchase time, but London-style congestion charges in cities, Italy-style zones where only residents may enter with cars at risk of stiff fines, and above all, sane parking charges commensurate with the real estate value of the space occupied by a parked car.

And, of course, plough that money into public transport, bike lanes, etc.

Otherwise we are all screwed. And I think we are. No Indian government is going to do any of this, the car lobby and the car-owner lobby is too powerful.
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Old 18th February 2018, 01:35   #7
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

In my not so humble opinion, this rule has led to 2 outcomes, both negative.

1) Flurry of ugly looking contraptions billed as cars

2) Puny wheezy engines powering them

Last edited by ashwin489 : 18th February 2018 at 01:38.
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Old 18th February 2018, 01:37   #8
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Quote:
Originally Posted by SS-Traveller View Post
strangulates the entry of newer, better engines into India, and leaves people with very few engine choices when buying their cars.
+1, classifying based on CC is very crude. As far as combustion efficiency is concerned, the technology is probably more important than mere displacement.

Three engines with similar fuel economy
- 2 litre BMW: 190 bhp, 400 Nm, 18 kmpl (X1)
- 1.5 litre VW: 109 bhp, 250 Nm, 18 kmpl (Vento)
- 1.3 litre DDis aka national engine: 89 bhp, 200 Nm, 19 kmpl (Brezza)

Coming to under 4m rule, it deserves due credit in cities for easing traffic congestion. But what about the rural areas?

We still are predominantly an agrarian country. Affordable pickup trucks such as Bolero is what we need. The CC rule, 4m rule and the GC rule, all of them work against the affordability of an essential rural need.

Anyways, few decades down the line we probably won't talk about CC. Maybe AH and HP are meaningful. 4m too is probably enough as EVs have less mechanicals and therefore more space.

Last edited by Thermodynamics : 18th February 2018 at 02:05. Reason: Rephrase
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Old 18th February 2018, 09:55   #9
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

I'm actually glad that the rule forced manufacturers to innovate and build sedans that were short in length, big on space. Just step into a Tigor or Amaze and see how well they have done in terms of maximizing space. Dzire is still a compromise but it is better than the Esteem (which it replaced). Compactness is the future- every inch of parking space costs money and if you can squeeze in a decent driving package within 4 m, why bother about more? I know that this rule killed most sedans which are real sedans. But in the Indian context, would you have a futuristic looking Tigor or something like the Sunny? When applied to the engine capacity, limiting them forced manufacturers to bring in turbo petrols. Except India, which other country has decent turbocharged petrols at a price less than $10000? Cars like the Nexon can be possible only because of regulations that were taken seriously by the industry to build products that complied, and were innovative.
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Old 18th February 2018, 10:20   #10
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Quote:
Originally Posted by SS-Traveller View Post
So is it time to scrap the rules governing small cars, tax vehicles more rationally and evenly across all segments, and let the Indian automobile industry bring us world-class cars and engines?
Partly agreed on this context.
Instead of passing the benefits by construction and dimensions let it be based on the performance,
- Tax benefit based on the efficiency (FE) : higher FE cars gets a lower tax slab
- Insurance premium benefits based on the safety (build & safety features) : More safer the car, pay less premium (this is already in place else where, am I right?)

OTOH we should also accept that the competition along with these rules got us some interesting cars in last few years.
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Old 18th February 2018, 22:28   #11
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Quote:
Originally Posted by SS-Traveller View Post
Drawing ..The excise duty on cars that are sub-4 metres in length, with engine capacity less than 1.2 litres (petrol) or 1.5 litres (diesel) was half (or less) that of cars which exceeded these specifications.

Understandably, the size rule was introduced with the intent of reducing congestion on our roads, and the smaller displacement engines were thought to be more frugal, saving the country crores in petroleum import bills... shop owners.

However, in reality in India, the reduced taxes on small cars saw a flurry of car-buying activity...available. The smaller engines were not as fuel efficient in real life as they appeared on paper (and in skewed testing methods by ARAI). Both these facts made sure that India did not manage to reduce its petroleum import needs ... such as Toyota installing the 1.4-litre diesel engine in the Corolla, or Maruti powering the Ciaz with a 1.2(P)/1.4L(D) engine.

With the ...few engine choices when buying their cars.

High-tech small engines such as the 1.0-litre EcoBoost never sold ... regulations governing small cars.

To sum up:
- The sub-4 metre rule did not reduce congestion on our roads;
- The <1.2L/1.5L engine rule did not improve fuel consumption or fuel import bills;
- India-specific small cars were created which do not have any export potential.

So is it time to scrap the rules governing small cars, tax vehicles more rationally and evenly across all segments, and let the Indian automobile industry bring us world-class cars and engines?
Quote:
Originally Posted by ashwin489 View Post
In my not so humble opinion, this rule has led to 2 outcomes, both negative.
2) Puny wheezy engines powering them
Quote:
Originally Posted by The Brutailer View Post
The ‘compact’ segment is a shoddy, amateurish effort by manufacturers in India aided by the silly laws of our government.
Quote:
Originally Posted by chiranjitp View Post
For me this was one of the worst rules to have been implemented in the Indian auto industry. ...
So, it doesn't necessarily mean that a smaller engine will be more fuel efficient than a slightly larger engine. The petrol variants of some popular premium hatchbacks like the i20, Polo have a power to weight ratio similar to that of my 01 Zen mpfi .
Beautiful thread, brilliant views !

In my view, this rule was unabashedly half-hearted, having no thoughts to future outcomes. 1.2 litre petrol and 1.5 litre diesel engines were set as the limit for compact cars. This indirectly promoted diesel engine due to more torque (blessing in Indian conditions) and fuel efficiency. Acting as a catalyst was price difference between petrol and diesel during those times. I am not against diesel, but this was not a very smart policy. Diesel fuel had subsidy during those times I guess and was later deregulated.

Next, the small petrol engine means the engine certainly works harder. I have a K12M powered Swift which is my daily drive and does highway duties too. Am truly in love with that little motor, but with full load it has to be worked harder (I enjoy it most of the times, majority wont); more so when one encounters flyovers and executes overtaking maneuvers. Not that it cant' manage, but harder working engine means efficiency isn't that good. The driver has to work harder too for gearshifts and advance planning for overtaking.

How the government arrived at 1.2 litres petrol displacement is beyond my understanding. Things get worse when it comes to small diesel engines as you all have rightly mentioned.

Quote:
Originally Posted by volkman10 View Post
Unfortunately the proposed new tax for greener cars ( not only for electric vehicles but also other relatively-cleaner technologies, such as hybrids, CNG, bio-fuel and methanol as well as fuel cells) too is dependent on the length.
Sometimes, I wonder what are long term plans for the automotive industry itself. Even during recent budget, EV were missed out.

Quote:
Originally Posted by V.Narayan View Post
We have lost perspective on what engine bhp is needed to lug a family of four around at between 20 to 80 kmph - that's the speed range most cars stay in for over 90% of their running time I guess - .... I only regret they didn't do more.
Earlier generation of cars had less horsepower but with larger engines a healthy dose of accessible torque was available. I earlier had 1.6 Baleno, it had just 7 more horses than my Swift, but was easily more effortless to drive and offered more or less similar efficiency. Smaller engines have to work harder impacting fuel efficiency and its effect is exacerbated when repeated slowing down and acceleration cycles are to be done.

Quote:
Originally Posted by rsidd View Post
It did not go far enough. It made small cars too affordable (among the lowest-priced in the world) and no government paid any attention to public transport.

It is time to tax all cars brutally. I speak as a car owner who tries to avoid using it (my preferred mode of travel is bicycle, 15+15 km/day, yes it can be done and you don't have to be an athlete to do it, it's actually faster than driving during peak hours).

We need not just taxes at purchase time, but London-style congestion charges in cities, Italy-style zones where only residents may enter with cars at risk of stiff fines, and above all, sane parking charges commensurate with the real estate value of the space occupied by a parked car.

Otherwise we are all screwed.
Somehow, I feel cars are already heavily taxed. And further taxes without credible alternatives wont help in long run. Route cause analysis has to be done. A few of my colleagues are in UK (work place is in outskirts of London) for around 3 months now. They are able to do without car there, but cannot survive without bike in a relatively smaller city I reside in. Those who have been there earlier speak volumes about how effective public transport is. My work timings start from 12 noon. During summers, its already 42-43 deg Centigrade in Vadodara, if I cycle down 7 kms to my office, I would be sweating and drenched in bad odor by the time I reach office.

Route cause is lack of public transport and even green cover for that matter.

We are yet to put in force crash tests, another area neglected by government. Regarding people moving from 2 wheeler to cars, its an expected shift which will continue till we have an efficient, effective public transport. India has large population which aspires to move up in life resulting into higher sales of new and used cars. Car is still a status symbol in most parts of our nation.

Last edited by aaggoswami : 18th February 2018 at 22:45.
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Old 19th February 2018, 07:15   #12
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Quote:
Originally Posted by rsidd View Post
Because foreign countries have better public transport and strong disincentives for cars.

It is time to tax all cars brutally.

And, of course, plough that money into public transport, bike lanes, etc.

Otherwise we are all screwed.
There is no otherwise about the last bit; deal with it.

And the first part - the word "and" in that sentence - can be expanded to everything that ails us in the public domain. We take the easily copied bits from places that our leaders love to read about or worse - from "learning" tours abroad - not realising that they do not work abroad in isolation - another example are the dedicated bus lanes. Or the app based hiring of cycles for inner cities being introduced as part of the smart city tamasha - within just a couple of weeks of an expensive introduction, this genius idea has broken down in Pune. Holistic solutions that start small, but address all root causes before proceeding to the next level is the answer. But that is too hard to do for our headline seeking leaders.

Taxing cars brutally is certainly a necessary stick; but where is the essential carrot on the other side that must also accompany it - efficient public transport infrastructure? Or even safe roads for two wheelers, be they motorised or not.

That is why even a rule such as this with good intentions leads to the unintended consequence of traffic congestion and vanishing of parking spaces in the cities.

Last edited by Sawyer : 19th February 2018 at 07:18.
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Old 19th February 2018, 08:43   #13
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

On the other hand, I also hold the radical view that no addition should be made to the existing roads within existing city limits by building/widening more roads and/or flyovers; all that should be done is maintain the surface quality - and this will also mean that there is no reduction in the green cover. Just like buying a bigger cupboard or a bigger home is only a temporary fix to the problem of running out of living space, eliminating the corresponding fix for traffic will naturally constrain city growth; as well as limit it to what the air around it refreshed by the trees in it can support. One reason for the SUV/car size bloat is because they can be driven on inner city roads, as an example of how additional road infrastructure built in the inner city gets misused, leading to it never being sufficient. This reduction of spend will also release money for public transport improvement for what will be naturally limited city growth at an individual city level.

Any new road building - and plenty of it should be initiated - should only be directed towards a faster inter city movement of goods with the benefit of that for private cars only a side benefit. Why also money should be spent to move people faster and faster between two business centres by bullet trains and hyper loops is also questionable with ever improving digital highways. As those highways improve, the need for people to move back and forth between cities will decline to leisure/holiday needs. What is the point of then having a hyper loop that allows people to move between Mumbai and Pune in 20 minutes instead of 3 hours, unless all the other problems the nation faces have first been addressed?

Some of the above thinking is debatable no doubt, but rules like those constraining car sizes by money incentives need to part of holistic thinking on these lines, not as knee jerk reflexes to each symptom that shows up. Because doing that simply results in another symptom showing up elsewhere in the system.
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Old 19th February 2018, 09:38   #14
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Default re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

To keep costs low, many small cars seem to be unsafe (in terms of what would remain of the cabin or its occupants in case of a crash). Most focus on how fast they can get from 0-100, but not how safely they can be stopped from 100-0. Many do not have airbags and ABS as standard fitment in their base versions.

Quote:
Originally Posted by ashwin489 View Post
In my not so humble opinion, this rule has led to 2 outcomes, both negative.
A third outcome in my opinion:
3) A lot of morons driving 4 wheelers the same way that they used to ride two wheelers earlier. Other by products: No lane discipline; unused seatbelts; added assumed safety; weaving in and out of traffic; cutting off others; ignoring/ violating traffic rules; untrained drivers with LMV drivers licenses; the list goes on

Last edited by selfdrive : 19th February 2018 at 09:41.
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Old 19th February 2018, 17:37   #15
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Default Re: 10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?

Quote:
Originally Posted by SS-Traveller View Post
So is it time to scrap the rules governing small cars, tax vehicles more rationally and evenly across all segments, and let the Indian automobile industry bring us world-class cars and engines?
The introduction of GST would have provided the perfect time to re-think such existing policies, but sadly it seems the < 4M < 1.2L rule will stick for eternity.
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