Financial Daily from THE HINDU group of publications
Tuesday, Jan 20, 2004
Financial Daily from THE HINDU group of publications Tuesday, Jan 20, 2004 |
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General Insurance Industry & Economy - Automobile Components Money & Banking - General Insurance Product liability cover offered to auto parts sector K. Giriprakash
New Delhi , Jan. 19 AUTO majors such as Ford and General Motors which insist on product liability insurance from Indian component makers, will now be able to outsource more work to them. This has been made possible with domestic insurance companies offering such insurance covers. The Auto Component Manufacturers Association of India (ACMA) President, Mr K.V. Shetty, told Business Line that the association had roped in Tata AIG to make presentations to members of the association and brief them about the benefits of such an insurance cover. He said some of the insurance companies have already started offering such packages for the component manufacturers. Theproduct liability insurance cover eases the acquisition and execution of export contracts as major automobile companies insist on such a cover if they want to offer large export contracts to the component manufacturers. Indian component makers face the risk of losing out big orders to other Asian countries like China and Thailand because of the lack of such an insurance cover. Currently over 50 per cent of the total industry exports is to the US and the European Union. Mr Shetty said with large OEMs (original equipment manufacturers) planning to shift focus to India to outsource more work from the country, the auto component makers face newer risks line stoppages, recalls and claims. Hence it was necessary for these manufacturers to arm themselves adequately if they want to expand their businesses. The component manufacturers association expects exports to touch around $1 billion during 2003-04 which could go up to around $2.5 billion by 2010. He said if global sourcing orders pick up, total exports could double to around $5 billion, he said. More than half of the members of association export their products and hence there was a huge opportunity for them currently to expand their capacities. He, however, said expansion of capacities may not lead to more jobs as the emphasis was on productivity from existing workforce. The ACMA Executive Director, Mr Vishnu Mathur, said if more greenfield projects are set up, it could lead to creation of more employment. The government should help in setting up special export zones for auto component manufacturers. Those setting up manufacturing facilities should be offered incentives like relaxation of labour laws and tax breaks to attract more business. Mr Mathur said the incentives should not only be offered to those who export components but also to those who supply to domestic OEMs. "Wherever the investment grows, the trade will also flow from there," Mr Mathur said.
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