The Hindu Business Line : CII suggests parks, incentives to drive up auto sector

THE Confederation of Indian Industry-Tamil Nadu State Council has recommended that the Government could facilitate setting up auto parks in different parts of the State and also start a scheme to provide incentives for automotive companies to be globally competitive.

Unveiling its vision for the automotive industry in the State, the CII-TN pointed out that the Automotive Component Manufacturers Association of India has suggested to the Centre to create auto parks in three or four clusters in the country.

Companies in the auto park will operate without the handicap of cascading taxes and high import duty when supplying within India and will be allowed to compete with manufacturers in the ASEAN (Association of South East Asian Nations) region and China by providing them world class environment.

The CII-TN said that the State Government should represent the case of local automotive industry to the Centre and facilitate setting up of these parks in different parts of Tamil Nadu.

Noting that while this proposal will benefit Greenfield investments, existing facilities may not realise the benefits of the proposed auto parks if they do not relocate to specific zones. To overcome this, it suggested that the Software Technology Parks of India model, which has been successful for the information technology industry, be adapted for the automotive industry as well.

STPI units enjoy various benefits that include approvals under a single window mechanism, all imports of hardware and software in these units are duty-free and import of second hand capital goods is also permitted, simplified minimum export performance norm and capital invested by foreign entrepreneurs can freely be repatriated after payment of income-tax.

After incorporating the features of the STPI into the auto park scheme, the Government should set up an Auto Export Parks of India, the CII-TN said.

These points are made in a report released on Thursday titled `A vision for the Tamil Nadu auto industry', prepared for CII-TN by ICRA Management Consulting Services.

The CII-TN's vision for the auto sector in the State envisages Tamil Nadu emerging as the top three destinations of choice in Asia for manufacturing automobiles and components by 2015. By this time, the output of the State's automotive sector will be $18 billion. Such growth will provide direct employment to 6-lakh people, the vision says.

For this, the report calls for action from all concerned — the State Government and the industry. It says there are two broad imperatives for realising Vision 2015 — attracting the requisite investments to Tamil Nadu and creating the capacity to absorb the quantum of investments in the State.

The present annual output of Tamil Nadu's automotive sector is estimated to be $3-3.5 billion and it contributes 7-8 per cent of the State's Gross State Domestic Product. The share of Tamil Nadu in the Indian automotive industry is estimated to be 25 per cent.

To achieve the estimated growth by 2015, the report says both Greenfield investments and investments to expand the existing capacities are required. It estimates that incremental direct investments in Tamil Nadu's automotive sector of $5 billion over the next 10 years are required, bulk — 60-70 per cent - of which would have to be by global multinational companies seeking to make the State their manufacturing hub and the balance by Indian companies.

It has suggested that the Government could study the approach adopted by countries such as Thailand and China and develop specific areas for their automotive sectors. Thailand, for instance, has formulated a vision for its automotive sector under a theme of creating the "Detroit of Asia'', the report says.

The other steps that the Government should take are: build the "Manufactured in Tamil Nadu" brand; facilitate product development capabilities by establishing world class testing facilities; encourage small and medium enterprises; provide world class infrastructure, intensify Government-industry collaboration to develop manpower capabilities; reform labour laws and provide flexibility to manufacturers to manage their labour force (some States such as Andhra Pradesh and Uttar Pradesh have simplified procedures).

On performance incentives to automotive organisations, the report has recommended creation of an "Export Promotion and Global Competitiveness Scheme" under which the State Government would reimburse 0.1 per cent of the export turnover for a limited period of three years to companies, provided they invest in a specified list of areas. The Government should link the incentives to tangible output like exports committed and achieved and employment provided.

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