Modi govt's new rules set an upper limit of Rs 12 lakh for cars, taking high-end SUVs and sedans off the military canteens' vehicle list

New Delhi: The Modi government has put a price ceiling on vehicles that can be bought from the Canteen Stores Department (CSD), taking away high-end and popular SUVs that personnel of the Indian Army, Navy and the Air Force bought from these canteens.

Gone is the Toyota Fortuner, the Ford Endeavour, the Jeep Compass and other four-wheel drives such as the Mahindra Scorpio and even the Tata Safari Storm. Only the base model of the Mahindra XUV 500 is now available in the military canteens.

The changes are part of new rules in place since 1 June.

Under these rules, high-end sedans such as the Skoda Octavia, Skoda Superb and seven of the eight models of Corolla Altis are also off the shelf.

All popular hatchbacks, however, are still available and so are the mid-range SUVs such as the Hyundai Creta and Ford Ecosport. Even here, military personnel will not be able to buy the top end model of the Creta.

The New Rules

A letter issued by the quartermaster general’s branch at the Army Headquarters on 24 May has stated that from 1 June, only vehicles with an engine capacity of up to 2,500 CC and costing up to Rs 12 lakh (excluding GST) will be available at the CSDs for armed forces personnel in the pay level of 10-18.

Those in the pay level of 3A to 9 can buy vehicles with a capacity of up to 1,400 CC that cost within Rs 5 lakh.

Before the new rules kicked in, there was no limit on the capacity or price of vehicles that could be bought through the CSDs.

The government has also clamped down on the frequency of purchase, reducing it to one vehicle in eight years from the earlier one in four years. As a result of the change, military personnel can buy one car during service and one after retirement but with the gap of eight years.

Military personnel along with civilians working in the defence establishment rely on the CSD canteens for the purchase of cars and other entities as apart from a Goods and Services Tax (GST) exemption, they get regular cash benefits.

‘Loss To Exchequer’

Official sources in the defence establishment say that Rs 17,000 crore is the annual sanctioned budget for the CSD. It is not part of the defence budget but is drawn from the miscellaneous head.

For products such as cars, the CSD negotiates a price with the dealers before the government steps in with a 50 per cent GST rebate on the reduced price. The 50 per cent rebate is viewed as a loss to the exchequer.

“More car sales in CSD means more loss to the exchequer,” an officer explained. “While there was a 17 per cent decrease in car sales in the country for the 2018-19 fiscal period, there was a 20 per cent increase in car sales through the CSD in the same period.”

He added that last year, car sales were over Rs 6,000 crore, or over one-third of the CSD budget, resulting in the budget itself being overshot. This, the officer said, resulted in a carryover liability of Rs 4,500 crore that is to be paid to car manufacturers.

“The popular belief is that the CSD customers’ money is paid to the car dealer or kept by the CSD but the amount is actually transferred within 48 hours to the Consolidated Fund of India,” the officer said. “Parliament’s approval is required to draw the money from the consolidated fund and this is allotted as part of the budget. The CSD then pitches in with the 50 per cent GST and makes the full payment to dealers after two years.”