GM not to bring in $50 mn

General Motors is producing Opel-Astra range of luxury cars through General Motors India Ltd (GMIL) — its joint venture with the C K Birla group company Hindustan Motors.

When contacted GM officials declined to comment. Industry sources, however, indicated that General Motors’ inability to bring inforeign equity emanated from Hindustan Motors’ lack of willingness to come up with matching share in the 50:50 joint venture.

Hindustan Motors officials also declined to comment on the issue. GM has sought relaxation in the MoU policy saying that the company had set up its joint venture much before the new automobile policy came into force in December 1997, sources said.

The company has also stated that it had already brought in a good amount of foreign exchange by roping in GM’s auto component division, Delphi Automotive Systems Corporation, they said.

A decision whether or not to relax the condition on the foreign equity part in the policy would be taken soon, they added. The government had earlier rejected BMW’s proposal to form a joint venture with the Hero group as the German auto giant had asked permission to bring in $35 million as foreign equity instead of the stipulated 50 million.

The equal joint venture between BMW and the Munjal group company was to manufacture the BMW A G and Rover rangeof passenger cars in India.

Another proposal by Skoda Automobilava of the Volkswagen group was also turned down by the government saying that no relaxation could be made in the automobile policy.

If the government decides to relax the condition on the foreign equity part, that would pave way for both BMW and Skoda to set up shops in the country.

"If government decides to relax the policy, that would be applicable to all. A decision is expected very soon in this regard," sources said.

Though one of the first multinationals to arrive in India, GM is the only automobile maker to sign the MoU with the DGFT. Hindustan Motors had signed the MoU last week for its Lancer project to become the seventh company to comply with the auto policy.

Honda was the first company to sign the MoU, followed by Ind Auto Limited, Daewoo, Ford Mahindra, Mercedes and Fiat India Auto Limited.

GM sources had earlier said that the company would submit a draft memorandum of understanding to the DGFT to import kits of its"Corsa", proposed to be launched in December next year.

India’s auto policy has of late become a contentious issue with the European Commission (EC) moving the dispute settlement body of World Trade Organisation (WTO) saying that the policy was not consistant with the WTO rules.

The EU’s contention is that the local component requirement and other features of the policy were contrary to the trade-related investment (TRIMs) pact agreed under the World Trade Organisation (WTO). India is to hold discussions with the EU in the first week of December in Geneva regarding the auto policy.