Why auto cos enjoy right to recall

In separate letters to the Union Ministers for Road Transport & Highways and Heavy Industries, the IIFRT has drawn their attention to inadequacies of the country's laws to tackle the menace of vehicle recalls by manufacturers. Voluntary recalls, as it is pointed out, are, at best, a good image-building exercises but do precious little to address the real issue, namely, fixing product and legal liabilities on the manufacturers. Recently, a reputed international car manufacturer in India recalled more than 70,000 cars due to technical faults. The instances of vehicle recall by other manufacturers for manufacturing defects are not rare in our country.

This brings to the fore several pertinent questions: how could there be design and technical defects, jeopardising the safety of common people, despite astronomical sums being spent by the manufacturers on R&D? What about the punitive laws, well-established in many other countries but absent in ours, against the failure of automobiles and tyres to protect the safety and financial interests of vehicle owners and other road-users? In our country, vehicle and tyre manufacturers — though some of the world's reputed brands are present here — have successfully stalled the government's bid to take steps in this regard. The Sunder Committee, which reviewed the Motor Vehicles Act, totally overlooked the need for the vehicle recall mechanism to fix accountability and penalty on vehicle manufacturers producing faulty products.

Stagnating air freight market

In July the air cargo market “stagnated” despite a reasonable performance on the passenger transport side, says IATA. As compared to the same period last year, air freight volumes were down 0.4 per cent, representing a 5 per cent fall on the peak demand seen in early 2010, although still 3 per cent higher than pre-recession levels. Load factors have weakened by 1.8 percentage points to 45 per cent, reflecting the strength of new capacity that has hit the market over the past year or so. It is worth noting that ‘freight-tonne-kilometres' in the Asia-Pacific have fallen by 3.9 per cent year-on-year in July, with year-to-date volumes showing a 3.5 per cent fall year-on-year. This contrasts with markets such as the Middle East, which is up 8.4 per cent for July, and Latin America, where it is higher by 7.4 per cent. In 2010 air freight lost market share to other modes, partly due to the composition of goods traded. However, this year underlying growth in world trade has been affected by the disruptions caused to electronics and automobile supply chains by the earthquake and tsunami in Japan, ans also by the economic slowdown. These figures are in tune with the tenor of much of the macro-economic data emerging recently. For example, figures from the Netherlands based World Trade Monitor show trade reversing its 2.6 per cent increase in the first quarter with a 0.6 per cent fall in the second, driven by a sharp 2.2 per cent drop month-on-month in June. The implications of these figures are that the core trade routes are still fragile.

Lending only a brand name

Does the presence of a reputed international company in our country always ensure flow of FDI into the country? Not necessarily. Let us take the case of the West Asia based global container terminal operator. It is successfully present in several Indian ports, save one on the Kerala coast, that is struggling to attract traffic. Inquiries reveal that the construction of the terminal in the port did not entail any significant FDI in the sense it is commonly understood. In fact, the domestic partner of the Indian subsidiary reportedly did everything — arrange external commercial borrowing, raising domestic loan of sizeable amount and chipping its own contribution to the equity. The contribution of the foreign partner was reportedly limited to supplying some equipment and software whose valuation was done by the firm itself. On other hand, reports have it that the authorities of the port concerned were required to shoulder a hefty burden by way of creation of infrastructure such as channel deepening, rail/road connectivity etc. Worse, some provisions in the original documents, it is alleged, were amended to make entry of the foreign partner easy though such an exercise slapped an additional burden on the government-owned port.

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