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IT TOOK FOUR years and innumerable drafts to take shape, but when the auto policy was finally declared on March 7, it had little to show for itself. Indeed, so much time had elapsed since the idea of an auto policy was first mooted, in 1998, that the industry and experts had begun to question the very need for such a policy in the emerging context. It is, thus, indeed fitting that the policy lays no ponderous conditions for investments: There is no minimum investment norm for foreign auto companies, and 100 per cent Foreign Direct Investment is to be allowed through the automatic route. This is as it should be. There is no reason why there should be curbs on investment when the country is eager to attract more FDI.

TheGovernment has done well not to impose minimum investment norms. The original proposal was to have a minimum investment criterion of $100 million for four-wheelers and $25 million for 2/3-wheelers. Mercifully, this proposal has been sent to the trash-can where it belongs. In a free-market economy, which is what India is aiming to be, investment in capacity creation should be more a response to the market and business environment than government policy. It is good that this reality has been recognised by the Government. There is also no mention of any export obligation for new foreign investors; it is assumed that companies that have signed the MoU will honour their commitment. The omission of such a provision in the new policy is probably a recognition of how it has been circumvented by the existing players.

Whileannouncing the policy, the Minister for Heavy Industries and Public Enterprises, Mr Manohar Joshi, said the Government would consider fiscal incentives and fine-tune the existing duties to encourage domestic production and ensure that the country did not become a dumping ground. This is in the Finance Ministry's domain, but Mr Joshi could have set out his idea of the ideal duty structure for the industry. It is necessary to stimulate a debate on the subject of imposts because what is good for manufacturers may not be so for the consumers. Consumers would surely be all for a low import duty on automobiles, especially two-wheelers, while manufacturers would want the continuance of the high duty levels.

Whileit is certainly necessary to ensure that the country does not become a dumping ground for cheap products, such need has to be balanced with the aspirations of consumers to get the best and the latest at optimal prices. There is certainly a case for adjusting the duty rates, especially the excise on domestic products. A back-of-the-envelope calculation shows that taxes and duties account for as much as 31 per cent of the ex-showroom price of a car with excise duty alone accounting for 20.5 per cent. If the objective is to stimulate domestic demand for automobiles, it would be impossible in the backdrop of such huge imposts. Any major tinkering with duties may, anyway, have to wait till the next Budget. The intervening period could be used to raise a public debate on the subject.

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