National Automotive Policy for holistic development of automobile sector on anvil
16 February 2018
The Department of Heavy Industry is in the process of formulating a National Automotive Policy for holistic development of the automobile sector in India. The proposed Automobile
Policy aims at developing a comprehensive long-term roadmap for the automotive industry, define the emission standards that will be applicable after BSVI with a target of harmonizing
with the most stringent global standards by 2028, across all vehicle segments
This roadmap will in turn enable the industry and support agencies to define the requirement of technologies, testing facilities, skill development and plan long-term investments,
including development of a roadmap for reduction in CO2 emissions through Corporate Average Fuel Economy (CAFE) regulations.
The roadmap will define corporate average CO2 g/km targets for all passenger vehicle manufacturers from 2020 onwards. Vision will be to match CO2 targets set by developed countries by 2025.
The policy prescribes economic penalties for manufacturers that do not meet corporate average targets and evaluate mechanism for flexibilities and provisions such as banking and trading of emission credits.
It will introduce a composite length and emissions based criterion for vehicle taxation, rationalise the GST structure for automobiles that is currently based on length, engine displacement, engine type and ground clearance.
It will replace the current classification criteria with a composite criterion based on vehicle length and CO2 emissions.
Vehicle length-based classification will target reduction in vehicular congestion and CO2 emissions based classification will align with the overall vision of green mobility and reduction in Green House Gas (GHG) emissions.
It will define thresholds for length and CO emissions with the objective of neutralising impact on GST revenue, monitor and review the thresholds based on market evolution and target of increasing share of greener vehicles.
The policy aims at achieving harmonisation of standards over the next 5 years by defining a roadmap for harmonising key standards and testing methods with global benchmarks.
Testing and certification agencies like ARAI and NATRiP will be upgraded in line with the harmonisation plan, so as to develop capabilities which are at par with global testing and certification agencies.
The department is evaluating accession to the UNECE WP.29 1958 agreement within the next 5 years, which will eliminate a major technical barrier to trade. Besides, it plans to implement measures to increase exports of vehicles and components.
For this, it is proposed to conduct a detailed study of business environment, procedures, infrastructure etc in export dominant countries such as China and Japan to identify areas of
improvement in India. Besides, it will identify and initiate trade agreements with countries having attractive markets for Indian automotive exports.
The department is considering a phased increase of duty credit scrips (from 2 per cent) for export of vehicles and auto components in line with comparable products to target countries under Merchandise Export from India Scheme (MEIS).
The National Auto Policy aims at improving the skill development and training eco-system, increase the accountability of Automotive Skills Development Council (ASDC) through
performance based funding linked to metrics such as incremental employment generated, level of employment, curriculum coverage, industry feedback, etc.
ASDC will implement a Labor Market Information System (LMIS) for aggregated information of certified candidates and serve as a marketplace to match demand and supply of skilled labor.
A detailed study has been planned to assess the logistics challenges being faced by the auto industry. Based on the results of the study, the department proposes to support the
development of a world-class logistics infrastructure, which would include development of Automotive Logistics Parks around existing automotive clusters with shared warehousing
infrastructure and integrated connectivity to roads, railways, ports and coastal sea routes.
It is proposed to improve the modal mix of cargo transportation and the utilisation of low-cost modes such as railways, coastal shipping etc.
Improvements in port infrastructure will facilitate exports and dedicated ports for automobiles and components exports are planned with dedicated storage space in ports.
Indigenous R&D will be scaled up with commercially viable innovations by setting up a 'Technology Acquisition Fund' to acquire technologies through licensing agreements, joint ventures or acquisitions.
Incentives will be provided to Public Private Partnership (PPP) based industry investments in research and development of commercially viable technologies through a Hybrid Annuity Model (HAM).
It is proposed to implement an outcome-based funding scheme for industry-academia collaboration. The vision of the scheme will be to promote innovation in technologies and
processes that have a direct impact on the automotive industry and have high commercialisation potential.
To be eligible for funding, the proposed project should have been initiated by industry or jointly by the industry and academia. Funding pattern for selected projects will be 25 per cent
by industry and up to 50 per cent by DHI.
The department will propose and implement tax exemption on different levels of R&D expenditure:
- 100 per cent if R&D investment is <2 per cent of turnover;
- 150 per cent if R&D investment is 2-4 per cent of turnover; and
- 250 per cent if R&D investment is >4 per cent of turnover.
The department will define applicable R&D expenditure heads and mandate audits by statutory auditors to verify R&D expenditure for companies to qualify for exemption, besides
developing capabilities and technology improvement in identified areas for auto component manufacturing.
Based on technology roadmap, the department will identify the critical components for which domestic capacities and capabilities need to be developed, encourage FDI in coordination
with Invest India to attract investments in identified areas and support auto component cluster development programmes in identified areas of development.