What the auto industry needs in India is not protectionism but an incentive to become better
The automobile industry in India may breathe a sigh of relief at last. While quota restrictions have been lifted at long last they have been provided a certain degree of protection by the government. The Society of Indian Automobile Manufacturers (siam) had lobbied extensively with the government to impose restrictions of the import of both new and second hand cars into India through customs duties. They feared that second hand cars from Japan and the West would wipe them out.
The conditions the Indian government is prescribing for the import of new and second hand cars for ensuring road safety and environment considerations are the following. Vehicles older than three years cannot be imported, they need to conform to the Central Motor Vehicle Rules, and import of left hand drive cars is out. Apart from this there is a mechanism of duties that has been set aside for second hand cars that is as high as 180 per cent. These rules may be good in the short run but they may not be good enough in the long run.
The answer to the above problem lies in environmental norms and not customs duties alone. Environmental barriers like uniform emission norms throughout the country could go a long way to prevent the entry of used cars in Indian cities and actually encourage the auto industry to become cleaner. In fact the wto allows a country to impose non-tariff barriers to trade if a country wants to protect public health or the environment but with the provision that these rules apply to both domestic and external carmakers. Therefore if only the sale of Euro ii or Euro iii cars is permitted in India then only these cars can be imported. Industry captains, if they are wise should think in terms of going Euro iii by 2002. This will keep dirty cheap technology out and protect the health of Indian citizens and move Indian industry forward.
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