Indigenisation Clause In Car Mous May Go

The government is willing to give companies leeway in the levels of indigenisation they fix for their different car models. The companies, would, be required to balance the outflow of valuable foreign exchange with inflow of export earnings on account of automobiles or related products.

The move comes close on the heels of a demand of a high level BMW team, led by chairman of its executive board Bernd Pischetsrieder, which has requested the government not to impose a mandatory per-car indigenisation programme as a precondition to give the license to import. Instead, it has asked for foreign exchange outflow and inflow neutrality to be the sole criterion for judging its proposed 5-Series car project.

Sources in the government say that commitment on increasing the indigenisation component of cars was being insisted upon by the government earlier in order to ensure the commercial viability of such projects.

However, thinking within government circles has changed with the government deciding to largely leave the issue of financial viability of a project to the company, while keeping a tab on the company's export-import record.

A senior official in the commerce ministry, when contacted by Business Standard, said: "Indigenisation of cars is important for the viability of a car project as it brings down production costs.