December 15, 2019
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Caught At The Toll Gates

A slew of tariff and non-tariff barriers means driving that cheap imported car will remain a dream

Caught At The Toll Gates
Caught At The Toll Gates
A three-year-old Mercedes for less than Rs 10 lakh? How about a four-year-old Toyota Corolla for Rs 5 lakh? Or an even cheaper Honda Accord of the same age? The average Indian's car dreams are getting second-hand wings. On April 1, when the gates open for the import of second-hand cars, automobile aficionados can keep their wishlists and wallets ready.

Or can they? Is importing a second-hand dream glider going to be as easy as that? Or as cheap, even after the 105 per cent duty announced in the budget which, when added to other levies like the countervailing and special duties, will finally translate into 180 per cent?

Expectedly, the domestic industry is in a huff. And even the high import duty hasn't been able to assuage the hurt feeling. "It's nothing short of killing the domestic industry," says industrialist Rahul Bajaj. Others agree. They feel it's a body blow for domestic automobile manufacturers who have "sunk in" millions of dollars in India and now face lower volumes and prices and depressed bottomlines. Says C.K. Birla, whose Hindustan Motors would be one of the worst affected: "Such imports have killed the domestic industry in other countries. High duties alone cannot help. We need carefully worked out non-tariff barriers to prevent indiscriminate imports."

And such barriers may well be in the offing in the Exim Policy 2001-02. Additionally, babus at Udyog Bhavan, home to the ministries of commerce and heavy industry, have been burning the midnight oil to prepare a new automobile policy pitched clearly to protect domestic interests.

There is good reason for the industry to cry foul. According to an automobile company executive, the final Indian price for a Japanese car would be around 3.4 times the price of a second-hand car from, say, Japan. So, if a 1996 Toyota Corolla costs $3,000 in the Japanese market, one can buy it for less than Rs 5 lakh (at current dollar values). That's cheaper than a 1996 Opel Astra here and peanuts compared to the expected prices of a host of middle-range cars to be launched over this year and the next.

Among other things, the new auto policy seeks to prevent "dumping" of junk autos in India. Many qualifiers are thus being attached, primary among which are that 1) the vehicles should not be more than five years old and 2) all vehicles should be right-hand drive. This, in essence, rules out imports from the US, parts of Europe and South Korea, left-hand-drive countries.

Leaving the ring open for right-hand-drive Japan, also the one with most stringent depreciation norms and an annual re-registration system which makes registration charges prohibitively expensive from the fourth year. This means that a large number of three- to five-year-old cars—eminently usable and "in excellent condition" in India—are being discarded every year. So how does one stop the Japanese cars from flooding in?

All Indian automakers undergo quality tests at India's two testing labs—the Automotive Research Association of India in Pune and the Vehicle Research and Development Establishment in Ahmedabad. The new policy makes it mandatory for each imported vehicle to do the same. Second, all imported second-hand vehicles must come through a single port, Mumbai. According to ministry sources, the auto policy may also insert the provision that all imported vehicles should come with a speedometer calibrated in kilometres rather than miles.

To make the car importer's life even more difficult, the policy adds another twist. Each importer must submit a pre-shipment test report to establish conformation with Indian standards. On arrival, these results have to match with the results from Pune or Ahmedabad. A road-worthiness certificate for at least five years from "authorised" Indian testing agencies will also be mandatory.

Underinvoicing is another concern. To prevent this, say sources, the government is likely to use industry catalogues listing used car prices in different countries. Japan and the US have monthly or quarterly booklets listing details and prices of all used vehicles.

All these norms may be bitter news for car importers and consumers but manufacturers find this the barest minimum. Says Anil Rathod, vice-president, Ford India: "In New Zealand, the local industry was killed by such imports. In Australia, the high tax on such imports ensured the survival of the home industry." Australia levies a high bounty tax on sale of all used vehicles, apart from barriers similar to those planned in India.

Auto enthusiast Veeresh Malik disagrees. "Just the fear of Chinese bikes has got two-wheeler manufacturers upgrading and dropping prices. Other than the carburettor engines, what do we have in India in cars? Even fuel injection was thanks to a Supreme Court push," he says. For now, at least, the government is trying its best to honour its hoary tradition: protecting the domestic industry against the consumer.
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