Liberalisation of imports will see MoU phase-out - Views on News from Equitymaster

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Liberalisation of imports will see MoU phase-out

Feb 17, 2000

Auto companies that have signed memoranda of understanding (MoU) with the government under the current policy will have to fulfill their export obligations even after quantitative restrictions are removed. Companies that have signed the MoUs will have to export cars in line with the export clause in the MoUs. The export clause will hold good even next year when import curbs are liberalised. However, liberalisation of import curbs will render future MoUs irrelevant and companies will be able to set up operations in the country without any strings attached.

This will lead to disparities between car manufacturers in the country, as far as export obligations are concerned. While companies like Daewoo and Hyundai that have signed MoUs will have to export (a part of their output) to fulfill their export obligations, other manufacturers who have entered the country later will not be forced to export.

But then companies like Daewoo and Hyundai can't really complain as they have benefited from concessions while setting up operations in the country. Companies that have come later will not avail of these concessions and therefore they do not have the burden of fulfilling export obligations.

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