Automakers may be in for a bumpy ride ahead, with the Government considering penalties based on the number of vehicles recalled from the market. The higher the number of recalls, the larger could be the penalty.

“Apart from the number of vehicles recalled, the safety aspect will be important in determining the penalty under the proposed Mandatory Vehicle Recall Policy,” a senior Government official told Business Line .

At present, there is no specific ‘recall policy’ and auto companies recall vehicles voluntarily, depending on manufacturing defects, as prescribed under the 2012 initiative of the Society of Indian Automobile Manufacturers (SIAM).

With the number of recalls rising, the Government has decided to formulate a policy that will provide parameters on the basis of which it can act against erring manufacturers. The parameters include the number of complaints by consumers and/or dealers, defects detected by enforcement agencies, and the number of accidents.

“The Government can suo motu investigate the matter and order action,” the official said, adding that the Automotive Research Association of India has given its views on the government’s initial draft.

Industry reaction

“You cannot penalise a company based on just a voluntarily recall. The global practice is that vehicles are recalled if there is some safety concern (faulty parts) so that it can be corrected. The penalty is only for companies that deliberately hide such facts and agree to their fault when it is found by the authorities,” Vishnu Mathur, Director-General, SIAM, told Business Line .

Rakesh Srivastava, Senior Vice-President (Sales and Marketing), Hyundai Motor India, said: “Product recall is common in developed markets. India also falls in this category. A recall policy should be seen in a positive way.”

There will be an inter-ministerial discussion on the draft, followed by public comment. Thereafter, the Road Ministry will move the Cabinet for an amendment in the Motor Vehicles Act, 1988, which will need to be approved by Parliament.

“We expect the whole process to be completed in the next six months,” the official said.

This will help the Government formulate rules and decide which Ministry will govern them. At present, the Road Ministry implements the Motor Vehicles Act while Heavy Industries is the administrative ministry for the automobile sector.

Similarly, while the broad legal framework for vehicle standards falls under the Central Motor Vehicle Rules framed by the Roads Ministry, the Heavy Industries Ministry is responsible for their implementation.

The proposed policy will have two main components: testing and deterrence. The report on the GM recall (114,000 Taveras in 2013) drew a roadmap to make the testing process much better in the short run.