"We are against export obligations and the memorandum of understanding route for investments is not acceptable to us," Hisamitsu Arai, Japanese vice-minister for international affair in the Ministry of International Trade and Industry (Miti) said.

Arai, who is here to attend the first India-Japan investment dialogue, said the auto policy was not in the interest of both India and foreign investors.He also said Japan would raise the issue of export obligations, stipulated in the policy to neutralise foreign exchange used up in importing auto componenets, at the dialogue with Indian officials.

Auto companies, who have not achieved 70 per cent localisation level, have to mandatorily sign the MoU with the directorate general of foreign trade (DGFT).

Japan already has third party status in India's dispute with the European Union and the US over the contentious auto policy under the World Trade Organisation (WTO) dispute settlement mechanism.

Japanese auto giants, Suzuki, Honda and Toyota have already signed MoU with the government, undertaking to export components and vehicles.

Arai said frequent changes in taxation and customs duties and bureaucratic bottlenecks, lack of infrastructure and foreign exchange regulations were also a major concern for Japanese investors in India.

Asked about India's target of $500 million Japanese investment by 2000, Arai said "these kind of figures are achievable only if India changes its investment policies."

"It is in India's interest that some of these policies have to be changed as they need more foreign investment," he said.

Information technology, electronics and automobiles were some of the sectors Japan was very keen to invest in India, he added.

Arai declined to comment on differences between the Indian government and Suzuki Motor Corporation over 50:50 joint venture Maruti Udyog Ltd (MUL) saying that individual companies have been asked to continue their dialogue on their own with the Indian side.

Suzuki has been demanding a majority stake in Maruti, which the Indian side has so far resisted.