Public Notice No. 60 (PN)/97-02 dated the 12th December, 1997
MOUs between Govt. and Car Manufacturers Sub:- Export and Import Policy April. 1997 -March, 2002 -Policy relating to import of CKD/SKD kits/components by Joint Venture Car manufacturer companies under MOU to be signed with the Government of India.
In exercise of the powers conferred under Paragraph 4.11 of the Export and Import Policy, 11997 -2002 as amended from time to time, Director General of Foreign Trade hereby draws attention to the above subject and the parameters stipulated in the year 1995 for import of CKD/SKD kits/components by the Joint Venture Motor Vehicle manufacturer companies under Memorandum of Understanding to be signed by them with the Government of India. These parameters have now been reviewed in the light of the changed circumstances and joint venture motor vehicle manufacturing companies (both existing and new) are required now to sign a fresh MOU with the Government of India as per the revised parameters.
2. Pursuant to the above, import of components for motor vehicle in ckd/ skd form, which is restricted for import under the current Export-Import Policy, shall be allowed for importation against a licence and such a licence will be issued only to joint venture automobile manufacturing companies on the basis of an MOU to be signed by these companies. Thus, all joint venture manufacturers shall enter in to an MOU with DGFT for Import of CKD/SKD kits/components.
3. The MOU shall be based on the following parameters:-
- Establishment of actual production facilities for manufacture of cars and not for mere assembly of imported kits/components.
- A minimum foreign equity of US $ 50 Million to be brought in by the foreign partner within the first three years of start of operations, if the Joint Venture involves majority foreign equity ownership. However, this condition will apply to new Joint Venture companies only.
- Indigenisation of components upto a minimum level of 50% in the third year or earlier from the date of clearance of first import consignment of CKD/SKD Kits/components and 70% in the 5th year or earlier. Once the MOU signing firm has reached an indigenisation level of 70%, there will be no need for further import licences from DGFT. Consequently, as and when the firms achieve 70% Indigenisation, they would go outside the ambit of the MOU automatically. However, they will discharge the export obligation corresponding to the imports made by them till that time.
- Regarding export obligation, the firms entering into MOU would achieve abroad neutralization of foreign exchange over the entire period of the MOU in terms of balancing between the actual CIF value of imports of CKD/SKD Kits/components and the FOB value of exports of cars and auto components over the said period. The period of export obligation would commence from the third year of commencement of production. The date of commencement of production would be deemed to be the date of the first release of consignment from factory after payment of excise duty, but there would be a moratorium of two years from this particular date of commencement of production during which the firm need not fulfil any export commitment. However, from the third year onwards (effective from date of release of first consignment), the MOU signing firm would have an export obligation equivalent to the cif value of imports made by them till that tlme for the reminder of the MOU period till they complete the entire export obligation. From 4th year onwards the value of imports of CKD/SKD may be regulated with reference to the export obligation1ulfilled in the previous years as per the MOU. The export commitment would be met by export of cars as well PS auto components. This export obligation will be over and above the EPCG related export obligation.
4. The MOU Scheme would be enforced through the import Licensing mechanism and MOU signing firms would be granted import licences by DGFT based on above parameters.
5. To monitor the progress in respect of the elements stipulated above all the Joint Ventures would submit annual reports to the DGFT on the parameters outlined above and a Joint Annual Review of the progress made in respect of these parameters would be undertaken by Ministry of Commerce, DIPP and Department of Revenue.
6. These revised guidelines will apply to all existing and future entrants into this sector.
7. By way of exception to the foregoing, companies intending to set up manufacturing units under foreign collaboration for light or heavy commercial vehicles, tractors, earthmoving equipments etc, will not be required to enter into any MOU. Their requests for ckd/skd Imports shall be considered by the Special Licensing Committee on merits on an annual basis.
8. A standard format for MOU is enclosed a appendix to this Public Notice and MOU is required to be signed as per this format.
9. This issues in public interest.
Sd/-
(N.L. Lakhanpal)
Director General of Foreign Trade
Issued by :
Government of India
Ministry of Commerce, New Delhi
(Issued from File No. IPC/4/5(593)/92-97)
MEMORANDUM OF UNDERSTANDING (MOU)
I. This MOU has been made on _____________ day of 1997/1998
BETWEENGovernment of India acting through the Director General of Foreign Trade (hereinafter referred to as the D.G.F.T.) Udyog Bhawan, New Delhi.
ANDM/s. ____________________________________________ (hereinafter referred to as the party which expression shall be deemed to include their executors, successors, administrator and assignee).
II. Whereas the party has sought issue of an import licence to cover import of CKD/SKD parts for manufacture of cars.
III. And whereas the party shall do the following by way of implementation of the Joint Venture:
(i) That the party shall make an investment of As. in this joint venture with equity share of US $ (RS. ) of M/s. -the foreign partner, which will be in freely convertible currency as per the time frame mentioned hereunder :
Year Foreign Collaborator's Equity Total investment Contribution in freely convertible (Rs. in crores) currency. (US$ in Millions) (Rs. in crores) (US$ in Millions)
(ii) that a minimum foreign equity of US$ 50 million to be brought in by the foreign partner within the first there years of start of operations, if1he joint venture Involves majority foreign equity ownership.
(iii) that the party shall establish actual manufacturing facilities, and not mere assembly facilities, in India to produce cars. The following will be production volumes yea-wise:
Year Production volumes (Numbers)
(iv) that the party shall achieve indigenisation of components upto a minimum level of 50 % in the third year or earlier from the date of clearance of first import consignment of ckd/skd kits and 70% in the fifth year or earlier. Once the party has reached an indigenisation level of 70% there will be no need for further import licence from DGFT. However, the party shall discharge the export obligation corresponding to the imports made by them till that time.
That the party intends to achieve the following levels of indigenisation of their product, year-wise:
Year Percentage(%) of indigenisation
The party shall aggressively pursue and achieve as soon as possible the development of the local supply base and increased local content, since the same will allow a higher level of indigenisation.
(v) that the party intends to import the following number of kits with CIF value as indicated in the first five years:
Year No. of kits CIF Value (Rs. in crores (US $ in Millions))
(vi) that the party shall achieve a broad neutralisation of foreign exchange over the entire period of the MOU in terms of balancing between the actual CIF value of imports of CKD/SKD/components and the FOB value of export of cars and auto components over the said period. The period of export obligation would commence from the third year of commencement of production. The date of commencement of production would be deemed to be the date of the first release of consignment from factory after payment of excise duty, but there would be a moratorium of two years from this particular date of commencement of production during which the firm need not fulfil any export commitment. However, from the third year onwards (effective from date of release of first consignment), the MOU signing firm would have an export obligation equivalent to the cif value of imports made by them till that time for the remainder of the MOU period till they complete the entire export obligation. From 4th year onwards the value of imports of CKD/SKD may be regulated with reference to the export obligation fulfilled in the previous year as per the MOU. The export commitment would be met by export of only cars as ...Jell as auto components. This export obligation will be over and above the EPCG related export obligation.
That the party intends to achieve export of cars and auto components as under year-wise:
Year Export (As. crores) Exports (US$in Million)
IV. To monitor the progress in respect of the elements stipulated above the party shall submit annual reports to the DGFT on the parameters outlined above and further licences will be issue to the party on the basis of an annual report of the progress made in relation to these parameters.
V. The MOU Scheme would be enforced through the import 1icensing mechanism and MOU signing firmswould be granted import licences by DGFT based on t~e progress made in respect of the parametersmentioned at para III above.
( ) ( )Managing Director Director General of Foreign TradeOn behalf of On behalf of Govt. of IndiaM/s ___________Witnesses: Witnesses:1. 1.2. 2.
(Above Public Notice No. 60 dated 12/12/1997
stands withdrawn vide
PN. No. 36(RE-01), Dt.4/9/2001.)
- Note:
- However, export obligation incurred by the MOU signatories in respect of imports made upto 31/3/2001 shall be fulfilled by them within the stipulated period unless extended by the Government for good and sufficient reasons.
(Above Note in bold has been stands withdrawn vide
PUBLIC NOTICE NO. 31/2002-2007, Dt. 19/08/2002)
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