Government initiates move to boost cars exports - Views on News from Equitymaster

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Government initiates move to boost cars exports

Feb 21, 2000

The government wants to give a fillip to passenger car exports and has drawn out plans to introduce the duty entitlement passbook scheme (DEPB) to this end. According to a leading financial daily, the DEPB scheme at present is extended to all two-wheelers, including mopeds, scooters and motorcycles, as also as commercial vehicles (CVs). The scheme is available to all semi-knocked down (SKD) and completely knocked down (CKD) units and completely built units (CBUs) of two-wheelers at the rate of 16% of exports.

As explained in the business daily, if a company exports CBUs of two-wheelers valued at Rs 10 m, it will get a benefit or credit line of Rs 1.6 m (16 % of Rs 10 m) in import of components.

Most car companies that have signed memoranda of understanding (MoUs) with the government will have to abide by the export clause, which comes into effect from the third year of operations. For instance, Hyundai Motors, will have to initiate exports by April 1, 2001. However, the company has already begun exporting to Nepal and has drawn out plans to break into other countries like Sri Lanka, Bangladesh, as well as countries in the Middle East, Africa and South East Asia.

If the DEPB is extended to passenger cars, companies will take the initiative to export, as the 16% benefit/credit line will prove a major incentive. Already, auto majors like Ford and Daewoo plan to outsource their cars for the global market from India. Other global manufacturers will also use this opportunity to set up base in the country if they are extended such incentives.

Moreover, companies like Tata Engineering (Indica) have already bagged export orders in a big way and will also benefit from the DEPB scheme.

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