The draft policy is not clear on the issue of graded excise duty structure for passenger cars. The final decision on the matter will be taken after securing the views of the finance ministry in this regard, sources said.

Some auto majors had proposed that excise duty for passenger cars should be based on engine capacity, while industry body, Society of Indian Automobile Manufacturers (SIAM), recently suggested a uniform duty irrespective of the engine size. Government sources said non-tariff barriers being proposed to restrict entry of used-cars would be with regard to safety and environment standards. This is the first time that the government is proposing non-tariff barriers on used-car imports along with high import duties. Till now, the government was considering high tariffs on import of second-hand cars as well as completely-built units (CBUs) so as to encourage manufacture rather than assembly of cars. Sources also added that the government would give incentives for electric vehicles such as Reva being manufactured by Scooters India.

The broad thrust of the policy will be to protect the domestic players who have invested in huge car facilities, check second-hand imports and coerce foreign players to transfer technology by making the provision for R&D facility conditional for project clearances. The policy is also expected to lay down minimum investment limit for foreign players in commercial vehicles, passenger cars, two-wheelers and three-wheelers. The government is setting the minimum foreign equity investment limit of $250 million for passenger cars, $100 million for commercial vehicles and $25 million for two-wheeler and three-wheeler auto companies. The government is also planning to include a proposal by which auto companies will balance royalty payments to their parent with export earnings. A clause may be introduced whereby auto major will have to earn through exports what goes out as royalty payment to its parent. It is understood that the existing players will also come under the purview of the new policy as they already followthe MoU guidelines.

The automobile policy has already been delayed. The heavy industry minister, Manohar Joshi had said that the policy will be announced in October.