Mercedes Signs Indigenisation Pact With Govt

Mercedes Benz has signed the MoU with the Director General of Foreign Trade on Wednesday late evening, even though the company had initially raised objections to the norms as prescribed in the policy.

According to the MoU proposal, Mercedes Benz would be importing kits worth Rs 535 crore till the year 2000, out of which 1350 kits would be imported within 1999 at a total cost of about Rs 69 crore. The company has already brought in foreign equity to the tune of Rs 278.66 crore, which indicates that the c.i.f. value of its imports are substantial compared with its present investment levels.

The company had earlier expressed its reluctance to sign the MoU with the government which prescribes an indigenisation schedule for auto companies, stating that its volume of production was too low to justify such an indigenisation level.

According to DGFT sources, Mahindra Ford was expected to sign its MoU with the government on Thursday. According to the proposal which has been submitted to the government, the company plans to import kits worth Rs 462 crore till the year 2000 though it has not indicated the exact number of kits to be imported.

The auto company has made an investment of over Rs 1,592 crore ($3789 million) which is more compared with most other foreign auto companies.

The companies had earlier approached the DGFT, seeking relaxation on the indigenisation schedule as prescribed in the MoU policy.

They pointed out that the schedule was too restricting and since these companies were serious investors, the policy was an encumbrance to them.

The other companies which have already signed their MoUs with the government include Daewoo Motors, Fiat and Honda Motors.

However, these companies had signed their MoUs with the government after the DGFT specified that their ad-hoc licences for import of CKD/SKD kits would be granted only after signing of the MoUs.

The MoU policy of the government prescribes indigenisation of components by car companies up to a minimum level of 50 per cent in the third year or earlier from date of clearance of first import consignment of CKD/SKD kits and 70 per cent in the fifth year or earlier.

Once the signing firm has reached this level of indigenisation, there will be no need for further import licenses from DGFT. Consequently, as and when the firms achieve 70 per cent indigenisation, they would go outside the ambit of the MoU automatically.