Mous For Car Firms To Go

Automobile companies which have signed memoranda of understanding with the government under the present automobile policy will have to fulfil their export obligations even after quantitative restrictions on automobile imports is removed. However, the MoU route will be scrapped after import curbs for the sector are removed, director-general of foreign trade N L Lakhanpal said yesterday.

"India is renegotiating its stand on Article 28 and negotiations are expected to be over any time now," Lakhanpal told a seminar on `Managing in a QR-less regime' organised by Confederation of Indian Industry here yesterday.

The phasing out of quantitative restrictions will have no no major impact on the Indian industry. While it may face some problems, they will not be severe, he further said. Besides, the process of dismantling started some time back and the industry has had time to adjust to the changes, he added. "20 per cent of the QRs are in agricultural items and these are already freely imported from SAARC countries," he added. Opening up to the rest of the world will not bring about any major changes, he opined. Industry will however have to face up to the competition and it will have to improve management, packaging, market research, brand building and other areas which it has been ignoring till now, he further said.

 

Chambers of commerce, however, will have to play a greater role in the new regime. They will have to be more vigilant and look at the interests of Indian industry, he stated. For instance, if they see a threat to any sector, they should inform the government so that appropriate steps can be taken, he added. Tariffs are still on the higher side and provisions like anti-dumping are always available, he further said.

Dr Arvind Virmani, Senior Economic Advisor, Ministry of Finance, expressed concern at India's tariff levels being among the highest in the world. India's unweighted and import weighted tariffs both exceed those of Pakistan, Bangladesh and Srilanka, he added. "We need to pay greater attention to the policy distortions which still exist", he added. Inappropriate policies, wrong incentives and excessive controls which hamper industry from becoming competitive are areas which need to be tackled, he said.

There is a need to develop markets for futures and forwards, insurance markets, and to look at the benefits of opening up distribution and processing in agriculture, he further said. Basic tariff rates have to be fixed in terms of long term price trends, and any movements away from them will have to be a short term measure, he added. "Qrs have in fact been illegal under GATT since 1947," said Dr Bibek Debroy, Director (Research), Rajiv Gandhi Institute of Contmeporary Studies. India has claimed exemptions under Article 18 (B) of the Gatt for using Qrs as a measure for dealing with the BoP problem. India is unlikely to be able to negotiate a bound rate of more than 40 per cent for consumer goods, once Qrs are removed, he added. This is because India has accepted a 40 per cent tariff binding for industrial goods, and it is unlikely to be able to demand a higher rate for consumer goods, except maybe for cars, liquor and tobacco. However, keeping in view the fact that borders are porous and arbitrage is a certainity, a 25 per cent trariff would lead to India being more competitive against South Asia.