Mumbai, July 18: The commerce ministry has not budged from its stance in granting import licences to car manufacturers Daewoo Motors India (DMI) and PAL-Peugeot. Failure to meet export obligations is being cited as a reason for the refusal, said top ministry sources.

While Daewoo Motors India has applied for importing 20,000 CKD (completely knocked down) kits of the Cielo, PAL-Peugeot has sought import of 18,000 kits to assemble the 309. The two companies had, in their memorandum of understanding (MoU) with the Directorate General of Foreign Trade, assured a certain export target in cars and components.

Other car manufacturers sought a moratorium on exports for a year or more and have had no problems getting their import licences renewed. The commerce ministry maintains that as regards PAL-Peugeot and DMI, their request will not be granted as they could not meet their export commitments. The fact that obstacles have cropped up along the way has fallen on deaf ears, ministry sources say.

If the impasse continues, PAL-Peugeot will be hit badly as it barely has around 200 kits left in its stocks. Production of the 309 is hovering at around 10 cars daily and this could be reduced further in the days to come as supplies run out. There is no indication yet of the company's plans but observers say that ``some harsh realities will have to be reckoned with''.

Sources in DMI said they were hopeful of getting their licence on time. The company has a backlog of around 6,000 kits which should see it manage its production schedules comfortably for the next six months. Sales of the Cielo have also not peaked during the current financial and that has allowed DMI to build up a safe inventory level, they add.

The government's attitude has drawn flak from observers who say the export clause is practically impossible to fulfil especially when demand in the local market has not taken off on the expected lines. The last two years have seen the mid-size car segment getting increasingly crowded with a host of new models. Most entrants here are slowly beginning to realise that some of their projections were `over-optimistic'.

All this is happening at a time when foreign carmakers have lined up mega plans for India as evident from the investments proposed. Sources, however, say the dream could turn out to be a nightmare if the government persists with its stance on exports. "When the quantum of foreign direct investment is enough to assure enough industrial activity, why stick on to this clause?" they ask. Interestingly, the cabinet is in the process of reviewing a new set of recommendations on car ventures. There have been reports that CKD imports will hereafter be classified as imports and attract a lower duty.

If that were to materialise, it would effectively nullify the need for an export clause as components are in the open general list in imports.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.