Aug 19, 1999|
Auto majors trip on exports
In FY99, multinational auto companies failed to meet their export obligations, as outlined by them in their Memorandum of Understanding (MoU) with the Directorate General of Foreign Trade (DGFT). By exporting, the companies neutralise the forex outflow on imports of completely knocked down (CKD) and semi-knocked down kits (SKD).
One reason for the decline in auto exports is the economic slowdown in international markets. Companies failed to make accurate demand projections and therefore failed to meet their export obligations.
Daewoo Motors of Korea heads the list with Rs 2 bn exports, while General Motors (GM) comes a distant second with Rs 1.2 bn. Failure on the part of foreign auto majors to meet their export obligations will affect their ability to import at a lower duty. A company can import at concessional duties only if it has met its exports in the previous years, else it will have to pay the import duty at the normal rate, which is higher.
If the auto companies reportedly default on their export obligations, it will raise their production costs, as imports will become dearer. The only other option for the company would be to increase their indigenisation level, which at present is at a minimum 70%.
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