MINUTES OF THE MEETING OF THE DEVELOPMENT COUNCIL FOR AUTOMOBILE AND ALLIED INDUSTRIES (DCAAI) HELD ON 29^TH JUNE, 2005 AT NEW DELHI.

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A meeting of the Development Council for Automobile and Allied Industries (DCAAI) was held on 29^th June 2005 at New Delhi under the chairmanship of Secretary, Ministry of Heavy Industries & Public Enterprises.

2. A list of participants is enclosed. Shri Anand Mahindra and Shri Kapil Dev, Members had requested for leave of absence, which was granted.

3. Shri A. Didar Singh, Joint Secretary, Deptt. of Heavy Industry and Member Secretary of the Council welcomed the members of the reconstituted Development Council and expressed his happiness on the presence of majority of the members in the meeting. Briefing the members about the action taken on the minutes of the last meeting of the DCAAI, he hoped that, in spite of the heavy agenda, deliberations would help in focusing Council’s efforts on the issues and the challenges ahead. He requested the members to be brief during presentations so that sufficient time could be devoted for getting the views of all the members on the agenda items. Thereafter, the Member Secretary requested the Chairman to address the Council.

4. Extending a warm welcome to all the members, the Chairman expressed that it was his privilege to chair this Council at a time when the automotive industry was passing through a defining phase in its history. He informed the members that although the Council could not meet for a considerable long time due to various unavoidable reasons, but the Department was in regular touch with industry leaders on several issues from time to time and had held continued dialogue on various other platforms. However, he emphasized the need to bring in a regular periodicity in holding the meetings of the Council and requested the members to finalise the date for holding the next meeting in today’s meeting itself.

4.1 Appreciating the high growth of the Indian Automotive Industry during the last few years, the Chairman stated that the industry had performed well both domestically as well as in the export market. The Indian Automotive industry has crossed one million threshold in passenger car segment and achieved a large growth in commercial vehicle segments specially multi-axle vehicles clearly reflecting gainful impact of fiscal policy dispensation and large investment in the road infrastructure. The Indian component industry is breaking free from the exclusivity of domestic OEMs and is reaching out to the world. The key challenges, however, he pointed out, are to maintain the growth levels domestically as well globally, strive hard to enhance the global presence and to make the ‘Made in India Brand’ a reality. The Chairman opined that stage was well set to make India into a major global automotive hub for which the Council should help formulate the strategy and draw up an action plan.

4.2 Drawing attention to the recent visit of the Minister of Heavy Industry to IDEA in Turin, Italy, Chairman informed the members that the IDEA officials had informed the Minister that recently they have opened a centre for auto design and development in Shanghai, China. The Chairman shared with the Council that in India with a large pool of skilled manpower with IT skills, styling and designing could be developed as an area of opportunity for growth of Indian automotive Industry. In order to be able to compete with countries like China he desired that institutions such as National Institute of Design (NID) and SIAM should enter into dialogue with IDEA or similar global outfits to chalk out strategy for creating such facilities in India.

4.3 Referring to the increasing integration of global markets and flurry of activities on bilateral and multilateral activities, the Chairman felt that there was a need to develop a proper understanding of the market dynamics for which some focused studies needed to be carried out. Chairman was also of the view that with increasing integration of global markets harmonization of standards also needed to be dealt with in a more focused way with a dedicated organizational set up, if required. Chairman pointed out that being a part of the WP 29 as observers the industry had developed a fairly good understanding of the issues involved and a time had come to decide on joining one of the treaties under WP-29. Chairman also urged the Council to offer its pragmatic advice to the Government on the proposal of formation of a body like JASIC in India.

4.4 Referring to the Government initiatives in promoting the Auto Policy, the Chairman informed the members that the taxes on the on the auto sector were getting rationalized, large investment were flowing into infrastructure and he hoped that ‘Bharat Nirman’ proposal of the Government would provide further push to the rural connectivity paving the way for larger automotive demand. In regard to the Government initiative for setting up National Automotive Testing and R&D Infrastructure Project (NATRIP), the Chairman hoped that this project would be launched within a few weeks from now. The Chairman in his concluding remarks stressed the need to deliberate and articulate clear and well defined strategies that are required to be implemented jointly by industry and Government in next 5 to 10 years to make the Indian auto industry sector into a major global player.

After the opening remarks by the Chairman, the agenda items were taken up for discussion.

5. Agenda Item No. 1:- Confirmation of the minutes of the last meeting of the Development Council held on 4.4.03.

The minutes of the last meeting were confirmed.

6. Agenda Item No. 2:- Ratification of decisions of the Cess Committee on the projects of various testing agencies sanctioned since the last meeting of the DCAAI.

The DCAAI ratified the decisions of the Cess Committee.

7. Agenda Item No. 3:- Current status and issues concerning the Automobile Industry, Auto Component Industry and Tractor Industry.

7.1 Shri Jagdish Khattar, President, SIAM made a detailed presentation on the current status and issues concerning the automobile industry. Discussing about the very good performance of the Automobile Sector during the last few years, he informed the Council that during the first two months of the current financial year, there had been a negative growth in the commercial vehicles segment. In the presentation the SIAM gave a brief account of the issues which are likely to have an impact on the Indian auto sector like the on going NAMA negotiations in WTO, negotiations on used vehicles trade, free trade agreements, preferential rules of origin, Auto Oil Policy, participation in WP 29 and National Road Transport Policy and stressed the need for funding the studies on Indian Clean Air Programme, competitiveness and recycling of vehicles in India. Speaking on behalf of SIAM, Shri Rahul Bajaj briefly highlighted the concerns relating to WTO which would have an impact on the automotive industry and emphasized there was a need to have cautious approach towards these issues to ensure that the Indian Industry is provided with a level playing field.

7.2 Shri Deep Kathuria, President, ACMA in his presentation informed the Council of the excellent performance of the auto component sector during the last few years. He expressed the hope that by 2015 the total industry size would be around US $ 40 billion out of which domestic market size was likely to be US $ 20 billion and export/global outsourcing of the order of around US $ 20 billion. For turning the Auto Component Industry into a sun-rise export sector he stressed the need for giving appropriate incentives to the auto component sector and the setting up of an Automotive Industry Modernization Fund on the lines of the textile industry. He also referred on the issues of FTAs/PTAs, inverted duty structure and import of refurbished vehicles in his presentation.

7.3 Shri T.C. Gopalan representative of the TMA on behalf of the tractor industry besides discussing the performance of the Tractor Industry highlighted the need for rationalization of financing for the tractor industry in case of other vehicle segments. Supporting the Government initiatives on setting up of NATRIP, he stressed the need for strengthening of existing facilities at Central Farm Machinery Training and Testing Institute at Budni.

8. The three presentations were followed by an open discussion.

8.1 In regard to the fall in production in first two months of the current financial years, Shri Rata N. Tata clarified that during the period TATA Motors had problems of short supply of components from one of the critical suppliers. Shri Tata mentioned that the transition from Bharat Stage-II norms to Bharat Stage – III norms, the non-availability of diesel of the new specification in some of the areas and initial problems associated with the transition to the VAT regime from the 1^st of April in some of the States had also contributed to the fall in auto sales in the first two months of the current financial year.

8.2 Briefing the Council on the WTO issues, Shri Rahul Bajaj pointed out that Indian economy was much more open than China. He stressed that for encouraging more value addition in India a level playing field to the Indian industry had to be provided and the Government should not succumb to the pressure from developed countries while entering into FTAs and WTO negotiations, and the applied rates of custom duty should not come down further from the present level. He requested the Chairman that the Deptt. of Heavy Industry being nodal administrative Ministry for the auto sector should strongly plead the case of auto sector while entering into FTAs and PTAs and the import of re-furbished and the remanufactured automobiles should not be permitted. He also stated that lack of infrastructure and properly trained and disciplined technical manpower were hindering the growth of the auto sector.

8.3 Shri Sarit Mohan Dev pointed out that while loan facilities were easily available for cars and housing sector, the banks were hesitant to provide similar facilities for the tractor industry. Shri Dev emphasized the need for subsidized finance for purchase of Tractors and purchase by the Panchyat bodies for use by the community for promoting the growth of tractor sales. Shri Abhay Firodia also stressed the need for reduction in refinance rates by NABARD to ensure easy financing for the tractor sector but was not in favour of over managing which would result in distortions. Shri Bijon Nag was of the view that the industry needed to specialize and strengthen the technical capability and wanted the testing and R&D infrastructure to be strengthened.

8.4 On being asked by the Chairman for suggestions for the growth of the auto sector and making India into a global automotive hub, Shri Ratan N. Tata pointed out that for the overall growth of the industry; there was a need to see the industry in a holistic manner. Comparing the strategy adopted by China and Japan Shri Tata informed that both China and Japan had treated the auto industry as a thrust area and provided all the facilities and support and a similar approach was required in our country also. He pointed out that more and more advanced technology was coming in the component sector which needs to be recognized and incentivised. Shri Tata was of the view that consolidation and constant up gradation of technology was the need of the day in order to make the industry capable to meet the future challenges and reach out to the global market.

8.5 While supporting the views of other members, Shri Jagdish Khattar highlighted the features of the Chinese Auto Policy and suggested that there was a need to revisit the Indian Auto Policy to make it focused and responsive to the present challenges of the Indian Automotive Industry. Shri Asutoshi Toyoshima expressed the need for training to drivers, education to pedestrian and school children and for adoption of better safety norms for the vehicles in the country.

8.6 Shri M.P. Bezbaruah opined that to make the industry globally competitive, there was a need for manpower and technical training reforms. Shri R.C. Jamathani, Planning Commission clarified that the Textile Industry Modernization Fund was being phased out and suggested that instead of trying to create such a fund for the auto components sector other alternatives for addressing the problem would be more useful. Smt. Sanchita Jindal representing the Ministry of Environment and Forest said that while there was a need for development and promotion of the Indian Automobile Industry, the environmental issues were also required to be taken care of simultaneously. Some members also emphasized the need for education and better training of the drivers for better safety.

8.7 Concluding the discussions, the Chairman agreed with the members that in order to comprehensively address the issues raised by the members a holistic approach needed to be taken and suggested that a Task Force with representatives of SIAM, ACMA and TMA needed to be constituted to discuss in greater detail the relevant issues and to ensure the sustained development and promotion of the auto sector in the country.

9. Agenda Item No. 4: Drawing up of 10 year Mission Plan for the development of the Indian Automotive Sector into a global hub.

The Chairman informed the Council about the recommendations of the Committee of Secretaries for the development of the auto sector into a global hub and after a brief discussion on the issues, it was decided that a Task Force may be set up under the Chairmanship of the Secretary, HI&PE with representatives from SIAM, ACMA and TMA which may co-opt members, if necessary, to study and identify the issues which needed to be addressed and formulate a mission plan for the overall development of the Auto Sector into as major global hub over the next 10 years. The Task Force would also decide on the proposals received by SIAM from the consultants and have professional studies conducted if required.

10. Agenda Item No. 5: Capacity building in the areas of Styling and Designing of vehicles.

10.1 Dr. Darlie O Koshy, Executive Director, National Institute of Design, Ahmedabad gave a detailed presentation bringing out the present activities being undertaken by the Institute and the proposal to set up Automotive Design Centres with the assistance from the Government.

10.2 During the deliberations on the presentation, the members agreed that the designing and styling of vehicles is a very important and a crucial area and the automobile manufacturers would need to set up such facilities to remain globally competitive. The need for increased interaction between the auto manufacturers and the NID and encouraging creation of facilities to train the manpower required by the industry for its in house design and styling facilities was stressed by the members and it was decided that the proposed Task Force could also look into the proposals given by the NID for the training of the manpower with the styling and designing skills and consider the issue of funding support for setting up of the training facilities to meet the industry’s requirements.

11. Agenda Item No. 6: India’s engagement with other Regions and countries under RTAs and PTAs.

This issue was also discussed in detail in the presentation given by SIAM and it was decided that specific proposals for conducting focused studies to develop a proper understanding of the market dynamics of the country with which RTAs/FTAs are being considered would be examined and decided by the Cess Committee.

12. Agenda Item No. 7 & 8: Institutional framework for harmonization of regulation in the Automotive Sector/Issues relating to India’s joining WP 29.

Shri Balraj Bhanot, Director, ARAI, Pune made a detailed presentation on the present status of the harmonization of standards after India’s joining WP-29 as an observer. He also briefly explained the Council about the differences and implications of the two agreements under WP-29, i.e. 1958 agreement and 1998 agreement. Shri Bhanot in his presentation stressed the need for a JASIC type institutional framework in India as proposed by SIAM. Shri Bhanot also pointed out that for India to have a say in the WP 29 negotiations process it is appropriate to join the 1998 Agreement now and a Group may be set up to study the implications of 1958 agreement. Shri S.K. Mishra, representative Department of Road Transport & Highways (DORTH) informed that DORTH was itself in the process of setting up an Office of the Commissioner of Road Safety and the Ministry of Heavy Industry was setting up the facilities under NATRIP and before considering setting up of any JASIC type institution the roles of the new institutions being set up would need to be clearly defined. The Chairman concluded that while there was agreement on India joining the 1998 agreement under WP 29, the other issues were complicated and the proposed Task Force would also look into these issues.

13. Agenda Item No. 9: National Automotive Testing and R&D Infrastructure Project (NATRIP).

Shri Sunil Chaturvedi, Project Director, NATRIP gave a brief presentation on the present status and progress of the NATRIP and stated that after obtaining the approval of the CCEA, the project was likely to be started within the next few weeks time.

Shri Rahul Bajaj, commending the Government’s efforts for the NATRIP, observed that regular funding of this project needed to be ensured for timely implementation of the project.

14. After deliberations on each Agenda items, the Development Council arrived at the following decisions:

i. SIAM’s proposals to conduct detailed study on India’s engaging with other regions and countries including South Africa on RTAs/ PTAs, the study on Clean Air Programme and the study on recycling of vehicles will be considered by the Cess Committee in its next meeting. Funding of these studies will depend upon the significance of the proposals for the auto industry and the availability of funds.

ii. ACMA will submit a detailed note on the suggested changes in the duty/tax structure and labour related issues for inter-Ministerial discussion on the subject.

iii. TMA will submit itemized Action Points including that of promoting availability of finance for the growth of the Tractor Industry for inter-Ministerial discussion on the subject.

iv. A Task Force with the representatives from SIAM, ACMA, TMA and DHI will be set up to take further action and approve funding support from the Development Council/Cess funds required for the following:

a. Drawing up of a ten year mission plan for development of Indian Automotive Sector into a global hub.

b. Setting up of facilities for training of manpower to meet the need of the industry for styling and designing of vehicles and auto components.

c. India’s joining of WP 29 under the 1998/1956 agreements.

d. Setting up of a JASIC like body in India for harmonization of standards.

Before conclusion of the meeting the Member-Secretary thanked all the members for their participation and in order to quickly follow up on the decisions taken in the meeting suggested that the next meeting of Cess Committee may be held by the end of July, the first meeting of the proposed Task Force by August and the next meeting of the Development Council may be held in the first half of December, 2005 after ascertaining the convenience of the members.

The meeting ended with the vote of thanks of the Chair.

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