New Delhi, Aug 17: Honda-Siel, the Indian subsidiary of auto major Honda Motor Co of Japan, has sought government permission to import components directly for its car -- City -- scheduled for launch next year.

This is a clear departure from the normal practice of foreign car companies which go in for the import of either CKD or SKD kits. If cleared by the government, the decks may also be cleared for similar proposals by companies, including Daewoo Motors and PAL-Peugeot.

The company plans to assemble 5,000 cars for three to four months, pending a new policy on MoUs for automobiles. Sources in the company said that an ad hoc import licence makes sense so that their Rs 450-crore project, which has been held up for over two months, gets off the ground. Honda-SIEL India has not signed an MoU with the Directorate General of Foreign Trade (DGFT) in the absence of a clear-cut policy.

The company plans to kick off with around 55 per cent localisation, which means that roughly 45 per cent will be the import content.

Company sources say that the key components which may be imported include engine and transmission, sheet metal and plastic components. The company feels that if it gets the permission, the customs authorities should not have any objection to the import of components.

Earlier, PAL-Peugeot had also applied for an ad hoc import licence for the import of 6,000 CKDs.

Several other companies, including Daewoo Motors and PAL-Peugeot, are awaiting the issuance of import licences for SKD and CKD kits. The commerce ministry has not cleared their licences as the companies have not met their export obligations.

It is understood that the new policy for signing MoUs with automobile companies and issuing licences for import of CKDs/SKDs is likely to be announced soon. The policy will have to be cleared by the Cabinet Committee on Foreign Investment.

While finalising the policy, the commerce ministry is believed to be considering proposals which include a foreign direct investment (FDI) of up to $50 million (Rs 180 crore) by the foreign company, a higher level of localisation and relaxation of export obligation norms. Industry observers say that currently a lot of the parameters are voluntary and proposals are cleared on a case-by-case basis. Also, many grey areas remain. They add that it is unrealistic to expect new car ventures to start exporting cars from their first year of operation.

Since components have been brought under open general licence (OGL), industry observers questioned the need for signing an MoU with the government for the car ventures. The problem area is how does one distinguish between compenent imports and CKD kits: at what level of components import does it become akin to CKD import?

It is believed that the new policy will not contain any duty concessions on kit imports. While CKDs attract a duty of 98 per cent, the duty on components ranges between 25 per cent to 30 per cent.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.