Date:12/10/2006 URL: http://www.thehindubusinessline.com/2006/10/12/stories/2006101204460100.htm

Back Auto parts makers seek zero duty on raw material

Our Bureau

Fear Japanese cos may source more from Thailand

General apprehension
There seem to be early indications that newer quotations being sought by Japanese automakers with a base in Thailand will be for a shorter period.

New Delhi , Oct. 11

The inverted duty structure is threatening to play spoilsport in the plans chalked out by the Indian auto components manufacturers, post the ushering in of the zero-duty structure on six major auto components on September 1 under the Indo-Thai FTA. Domestic auto component makers have expressed apprehension that automotive investment, especially by Japanese automakers, may be diverted to Thailand over the next 2-3 years.

In fact, an official from a domestic auto components company pointed out that components firms who are supplying to Japanese automakers are already feeling uneasy about the uncertainty surrounding future contracts. "There seem to be early indications that newer quotations being sought by Japanese automakers, who have a base in Thailand, will be for a shorter period," the official said. This may indicate that the newer models launched by these companies in India may have a higher import content.

To redress the inverted duty structure issue, the Auto Components Manufacturers Association (ACMA) has made a representation to the Commerce Ministry seeking zero duty on raw materials.

Post September 1 there is zero duty on certain components imported from Thailand. These include engine parts, lighting equipment, ball bearings, gear boxes/transmissions, pumps, and helical springs. The Government had reduced the duty on raw materials required in manufacturing these components to 10 per cent in 2004, when the duty on the components included in the early harvest list under the Indo-Thai FTA list was 12.5 per cent.

The association has urged that since the duty on import of these components is now zero, the duty on the raw materials should also be brought down to zero. It further said that the local industry was facing difficulty with the components permitted to be imported at zero duty, while raw materials attracted a 5-12.5 per cent customs tariff. These raw materials include certain grades of alloy steel and aluminium alloy, among others. Major Indian auto component companies who make components which are included in the Indo-Thai FTA list include Lumax, Minda, NRG, FAG, Rane, Shriram Pistons, among others.