Automakers set to get some relief on penalty for vehicle recall

Shishir Sinha New Delhi | Updated on January 24, 2018

Centre set to cap total payout for each company, drop proposed ₹5 lakh/ vehicle

Automakers are set to get some relief from stringent norms on vehicle recall proposed in the Road and Safety Bill. The Centre now plans to cap the total penalty payout for each company, as is the global practice, instead of the proposed penalty of ₹5 lakh a recalled vehicle

“There is an agreement on revising the penalty amount. Now, the thinking is to prescribe a cap on total penalty payout along with penalty per vehicle,” a senior Government official told BusinessLine. The draft Bill prescribes a ₹5 lakh fine per vehicle (the amount may be differentiated on the basis of vehicle size) or imprisonment for three months or both for manufacturing faulty vehicles.

The Heavy Industry Ministry has argued that in order to avoid undue pressure on automobile companies or create a conflict between authorities, capping the total penalty payout is required. In most developed countries, there is fine of $10,000-15,000 a vehicle with an upper ceiling of $3-$5 million, in terms of total pay out, the Ministry has said.

If there is no ceiling, a small auto company or companies making electric vehicles will suffer the most, a senior official said adding that the fine could be certain percentage of total turnover of a company. Another provision, which is likely to see some change is the one related to the recall of vehicles on the basis of 100 applications.

A Committee of Secretaries headed by the Cabinet Secretary Ajit Seth discussed the draft Bill and proposals for changing some of the provisions. The committee discussed the proposal by the Heavy Industry Ministry (the administrative Ministry for Automobile Industry) beside others. It has favoured redrafting of the bill.

Now the Automotive Research Association of India is helping the Road Ministry in re-drafting the Bill. “The Bill is expected to be ready in a couple of weeks, and then the process of putting it before the Cabinet will start,” he added.

Conditions for recall

The draft Bill prescribes three conditions for vehicle recall. One of the conditions says a defect in a particular model of motor vehicle should have been reported to the national authority by 100 or more people. The defect should be harmful to drivers or passengers of that model or to other road users, or render that model non-compliant with the provisions of the Act, or render that vehicle model unusable.

The official said that rather than act upon a certain number of applications, there should be a scientific mechanism and tests by an accredited agency to establish the faults first. Only then should a recall order be issued, he said. “The fault can also be established through accident data, data from dealers (how many vehicles of a particular make are coming for servicing and how often) and also from market intelligence,” he added.

He also said that the National Automotive Board (NAB) might continue with the task of advising the Governments on safety standards for the vehicles. The draft talks about giving this task to proposed National Authority.

Published on January 19, 2015

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