Fearing Loss Of Control, Auto Comp Sector Applies Brakes

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New Delhi, Sept 1: : The domestic auto component industry is not ready for ‘zero-for-zero’ proposal put forwarded by the chairman of the negotiating group on market access (NGMA) in the run up to the Cancun ministerial conference under the aegis of WTO.

According to the proposal moved on May 16, 2003, the final bound rate on Motor Vehicle Parts and Components in addition to other products, would be brought down to zero in a phased manner.

An official of Auto Component Manufacturers Association (ACMA) said, “the industry has suggested that automobile prodcuts such as passenger cars which are currently unbound should remain unbound”. Indian auto component manufacturers are inherently competitive and can withstand global competition provided the anomalies in the system are rectified, the official said adding, “before accepting the proposal, the commerce ministry should take steps to reduce duties on raw material to zero; implement state and central VAT; make the Competition Commission functional; and ensure that Indian markets function competitively and efficiently.”

“One of the biggest fears in the auto component sector is reverse tariff escalation,” he said. As much as 50 per cent of the cost of an auto component is cost of raw material namely iron and steel, copper, aluminum and plastics. The import duties on these raw materials are in the highest slabs in India. Accepting the proposal will create an uneven playing field at the existing rates of duties.

Given the powerful lobbies of the raw material manufacturers in India, the chance of lowering the import duties to zero is remote, the secretary general of Federation of Micro and Small & Medium Enterprises (FISME) Anil Bhardwaj said.

He added though the zero duty regime could improve access of Indian auto components in foreign markets as export products are spared of import duties, it would devastate the domestic manufacturers. There are around 25,000 small scale units besides thousands of units in the unorganised sector that are chiefly catering to domestic markets. These units will be severely affected.

The net exports of the auto component sector during 2001-02 is $578 million which is expected to go upto $2.5 billion by 2010 as per the association’s projections. The sector imports mainly second hand capital goods.