Volvo Project May Be Exempted From Export Obligation

The directorate-general of foreign trade is willing to consider a request by Swedish automobiles major Volvo to exempt the company from export obligations in exchange for permission to import equipment. The directorate has asked Volvo to submit a concrete proposal for relaxation of the extent of indigenisation and export obligations imposed on the company under the memorandum of understanding (MoU) it will have to sign with the government.

The directorate is willing to consider an exemption for Volvo since the company is seeking an MoU for the high-powered transport sector rather than the luxury car sector. The kind of commercial vehicles, trucks and buses that the Volvo project is looking at bringing into the country are not manufactured here at all, explained an official. Therefore, this project can seek certain exemptions since it would strengthen our transport infrastructure.

 

If the Volvo proposal is cleared, it could open the floodgates for similar requests by other automobile manufacturers, including South Korean majors Daewoo and Hyundai, which are finalising major investments in their proposed light, medium and heavy commercial vehicle ventures in India.

Volvo recently held preliminary discussions with DGFT officials. According to sources, the company proposes to manufacture trucks of 30 tonnes and above., as well as buses with a capacity of around 250 passengers. Such massive vehicles are currently not being made in India.

Earlier, the joint venture between the C K Birla group and General Motors had sought an exemption from signing an MoU. The company had argued that it would need to import completely knocked down/semi-knocked down kits for only one-and-a-half years, after which it would stop such imports altogether.

In other words, the company was arguing that it would indigenise faster than other car makers. However, the request was turned down.

Sources pointed out that the commerce ministry may soon be forced to review the entire MoU system once it agrees to phase out all quantitative restrictions under World Trade Organisation (WTO) norms. In any case, the companies have not been meeting their export obligations.