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May 2, 2001
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Money > Business Headlines > Report May 2, 2001 |
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Car makers veer to SKD kit routeSwati Prasad, Sidhartha & Partha Ghosh With the increase in customs duty on completely built units of passenger cars posing a roadblock in the launch of new models, car manufacturers' are steering towards the semi-knocked down kits route. An amendment to the Finance Bill has increased the customs duty on CBUs of cars from 35 to 60 per cent. The duty on completely knocked down kits and SKDs is 35 per cent. "Our plans are focussed on SKD kit imports and their assembly in India," says a Skoda executive. The company is likely to announce the launch date of its mid-size car, Octavia, in India this month. According to a Ford India executive, the company is reviewing its CBU plan. It may also study the SKD route if the volumes are viable. Ditto for a General Motors India executive, though the buzzword, he says, is the trade-off between volume and investment in assembling SKD kits. According to an interpretation of the April 26, 2001 guidelines, a CBU of a car becomes an SKD kit if the battery, tyres and seats are removed. All these could be outsourced from local manufacturers cheap, said a SIAM functionary. Thus, a company can import almost a CBU at the import duty of an SKD, he adds. As per the notification, CBU means completely assembled vehicle, whether or not fitted with tyres or batteries. In any other form, it would be liable to 35 per cent duty. "As per Rule 2(A), which defines CKD and SKD kits and lays down import norms, if a motor vehicle being imported had an engine, gear box, transmission assemble system, body/cab, suspension system and axles (front and rear), it is considered a CBU," says the SIAM executive. "But now, manufacturers can take advantage of the latest notification that has redefined CBUs," he adds. There are many advantages in taking the SKD route. The duty on SKDs is far lower-at 35 per cent-and is modvatable. Secondly, the investment limit for SKD assembly is lower than that for a CKD assembly line. Anything between Rs 200 million and Rs 500 million may be required for CKD assembly, car manufacturers say. Also, for SKD assembly, the investment limit is lower. And thirdly, the government seems to be in favour of the SKD route since it leads to value addition within the country. A top commerce ministry official said: "The SKD route is fine with us. We want manufacturers to at least assemble cars in India and not import them. Even if they want to import parts like seat covers and horn, that is all right. So long as they are assembling these parts in India." Powered by YOU MAY ALSO WANT TO READ:
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