NEW DELHI, July 29: The Union government's initiative to evolve an automobile policy governing import of completely knocked down (CKD) and semi-knocked down (SKD) kits has run into fresh trouble with finance ministry and commerce ministry crossing swords over the issue.

Highly-placed official sources said that the proposal was stuck in an inter-ministerial debate. The finance ministry has pointed out that the proposal of lowering duty on the import of CKD/SKD kits would be possible only if there is a comprehensive definition to demarcate CKD/SKD kits from components.

Sources said that an inter-ministerial meet involving the commerce, industry and finance ministries, would be held shortly to tackle the issue. "The customs department is yet to evolve a definition that spells out the transition from the CKD to components stage," sources said.

The automobile industry has been demanding that the government outline a comprehensive policy that would do away with the memorandum of understanding (MoU) route which requires year to year approval by the directorate general of foreign trade (DGFT). The Union government evolved the memorandum of understanding route to link levels of indigenisation to CKD/SKD imports.The controversy over import of CKD/SKD kits has arisen afresh after two years as most of the auto majors have reached `suitable' levels of localisation.

The auto industry is of the view that the government evolve a cut-off or threshold limit beyond which CKD/SKD kits can be imported as components. The Association of Indian Automobile Manufacturers (AIAM) is of the view that only if a manufacturer is importing more than 70 per cent of the vehicle value should it be considered a completely built unit (CBU) and thereby attract a higher duty of 98 per cent.

AIAM has also pointed out that if at all a regulatory mechanism for the import of CKD/SKD components is considered necessary, the framework should provide flexibility, transparent and uniformly applicable to all the players in the industry.

The apex body of the automobile manufacturers has also suggested that in order to provide incentives for indigenisation, higher rates of customs duty could be imposed if the import content exceeds the threshold level, say 70 per cent.

Meanwhile, two new players - Honda of Japan which plans to launch the City model and Volvo who is planning to enter the heavy commercial segment - are yet to sign MoUs for import of CKD/SKD kits. Honda of Japan is yet to submit a proposal to the commerce ministry as it is waiting for the new guidelines to be announced.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.