The DGFT told Skoda Auto, part of the Volkswagen group, that "no relaxation of the automobile policy can be made". The policy lays down 50 per cent indigenisation in three years and 70 per cent in five years. It is learnt that representatives of the Czech-based company recently met officials and put forth their case. The company feels that the project involves a very high level of technology which would be difficult to achieve initially.They also needed certain clarifications on the policy as to how the level of localisation was to be calculated and how to compute the export obligation of a particular car project.

Skoda has also pointed out that it was setting up a full-fledged plant with machinery, and it was not a mere assembly plant. The level of localisation, which has been a thorny issue, has been resolved for most foreigncar makers. Earlier, auto majors including Fiat of Italy and Mercedes Benz India Ltd also wanted lower levels of localisation. But Skoda is still negotiating with the government to find a possible solution to the problem.

The company has been planning to enter India with the complete range of Felicia which includes a passenger car, a station wagon (Skoda Combi) and a light commercial vehicle (Skoda Pick Up). It has, in its proposal, indicated that the greenfield project will have a production capacity of 60,000 cars, which will be installed in seven years. The Felicia will be available in two versions -- diesel and petrol. The Felicia diesel would be powered with a 1.9-litre engine and the petrol would be available with 1.3- and 1.6-litre engines.

The project involves an investment of over $300 million. The company is planning to get its own equipment suppliers from overseas. Sources say that around 30 to 35 international suppliers would follow with 15 new technologies.

Top officials of the company havebeen visiting in the country from on a regular basis to select a site for the project. The Volkswagen group perceives that India has an important role to play within the development of the world market.