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Journalism of Courage
NEW DELHI, June 15: Fiat has become the second auto company to accept the 70 per cent indigenisation norm set for auto companies. The company is expected to sign the memorandum of understanding MoU within the week, sources in the Directorate General of Foreign Trade DGFT said. The first company to sign the MoU on these terms was the Siel-Honda venture on April 27.
With the indigenisation norms gaining acceptance among auto companies, the DGFT is unlikely to review them despite the pressure being exerted by Japan and the UK who have been been seeking a reduction in the level. Although the Government had earlier this year agreed to reconsider the 70 per cent indigenisation level, it is now revising its stance on the basis of these two MoUs.
Earlier this year, Japan and the UK had raised objections to the prescribed levels of indigenisation on the grounds that it violated the Trade Related Investment Measures TRIMs under the World Trade Organisation WTO.
The DGFT claims that as it permitsunlimited imports by these companies it was within its rights to impose certain conditions on the companies, especially with the aim of developing India as a manufacturing base and not merely an assembling centre.
The MoU prescribes 50 per cent indigenisation of components by the end of the third year and a level of 70 per cent by the fifth year or earlier, but with now limit on the level of imports. When the firms achieve 70 per cent indigenisation, they will go outside the purview of the MoU.
The Siel-Honda venture, for instance, has agreed to maintain an indigenisation level of 52.83 per cent during January-March period of this year, a level of 57.88-per cent over the second and third quarters and a level of 63.06 per cent over the fourth quarter. For 1999, the company has committed an indigenisation of 67.57 per cent and a level of 71.17 per cent in the year 2000.
The MoU also imposes an export obligation over and above the commitments under the Export Promotion Capital Goods EPCG scheme. Thecommitment will be met through export of cars and components over the entire period of the MoU. It also prescribes a minimum foreign equity of 50 million to be brought in by the foreign partner in the case of a joint venture, within the first three years of operations.
