New Draft National Automotive Policy : An analysis

Context:

• Ministry of Heavy Industries and Public Enterprises is working for formulating the National Automotive Policy for holistic development of automobile sector in India.

Background:

• The Government of India and the Indian automotive industry articulated their objectives for the future of the industry through the Automotive Mission Plan 2016-26 (AMP 2026).
• The very need of the plan is to place India among the top three in the world in engineering, manufacturing and export of vehicles and auto components by 2026.

 What are the objectives of National Automotive Policy?

• The objectives of National Automotive Policy are as follows:
• to provide a long-term, stable and consistent policy regime and to have a clear roadmap for the automotive industry,
• making India a globally competitive auto Research & Development and manufacturing hub and
• achieving the targeted objectives of green mobility.

 What are the provisions of National Automotive Policy?

The provisions of National Automotive Policy are as follows:

• Adopt a long-term roadmap for emission standards beyond Bharat Stage (BS) VI and harmonize the same with global standards by 2028.
• Rollout Corporate Average Fuel Economy (CAFE) norms till 2025 and beyond and setup incentives/ penalties.
• Adopt a composite criterion based on length and CO2 emissions to classify vehicles for differential taxation purposes.
• Harmonize automotive standards over the next 5 years in line with WP-29.
• Improve the skill development and training eco-system, increase accountability of Automotive Skills Development Council (ASDC) and implement a Labor Market Information System.
• Retain tax exemption on different levels of Research & Development expenditure with strong audit control.
• Scale-up of indigenous R&D with commercially viable innovations.
• Harmonize Applicant Information System (AIS) and Bureau of Indian Standards (BIS) standards on safety critical parts over next 3 years.
• Fast track adoption of Bharat New Vehicle Safety Assessment Program.
• It proposes creation of a nodal body with a two-tier structure having an Apex Body supported by the National Automotive Council (NAC).

 What are the advantages of the new National Automotive Policy drafted for the holistic development of automobile sector in India?

The advantages of the new draft National Automotive Policy are as follows:

Industry-friendly:

• The Government endeavors to make the New Auto Policy industry-friendly.

Boost for Make in India:

• The policy ensures the success of Make in India scheme.

Changing with time:

• The Ministry will continuously adapt and modify the policy so as to keep up with the changing times.

Investment of international companies:

• This policy takes major international companies into its account to invest in India.
• India and other international companies could work together in terms of investing in Research & Development, sourcing of auto components from India, tooling & advanced materials as well as software development.

Policy-stability:

• The Ministry provides the policy-stability that overseas investors seek.

 What are the drawbacks in achieving the objectives of the new draft National Automotive Policy?

The loopholes in the new draft National Automotive Policy are as follows:

Differences between the standards of new and replacement parts:

• Discrepancies between the standards of new and replacement parts can cause major issues in safety, emissions, and performance of the vehicle.

Dual certification requirements:

• The dual certification requirements lead to higher cost of compliance for smaller manufacturers.

Poor domestic capability:

• Poor domestic capability for producing components used in green vehicles will be a major bottleneck for shifting to cleaner vehicles.

Absence of a long-term industry roadmap:

• Currently, the automobile industry needs a long-term visibility of automotive regulations and avoids any uncertainty on the future requirement of technologies, testing and skills.

Shortage of skilled manpower:

• The automotive industry in India is in continuous need of skilled manpower, given the limited training capacity and employability of the trained workforce.

Issues with the supply chain infrastructure:

• Inadequate development of logistics and supply chain infrastructure in India leads to inefficiencies, delays and high costs.

 How will the objectives of National Auto Policy implemented for its long-run success?

The objectives of the National Auto Policy will be met through policy interventions across three identified focus areas. These include:

• Innovation,
• Research and
• Development

• Automotive companies across the value-chain will be encouraged to intensify innovation and research by developing domestic capabilities.
• New entrants and existing original equipment manufacturers will be supported in their domestic and export growth ambitions, while ensuring a level playing field for all.
• The component manufacturers will be encouraged to move up the value chain through higher value-added offerings in electronics, electrical and system supplies.

 What are the recent government initiatives for the automobile sector of India? (Updated)

Some of the recent initiatives taken by the Government of India are:

• The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route.
• The Government of Karnataka is going to obtain electric vehicles under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) Scheme and set up charging infrastructure across Bengaluru.
• The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the country for introduction of electric vehicles (EVs) in their public transport systems under the FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme.
• Energy Efficiency Services Limited (EESL), under Ministry for Power and New and Renewable Energy, Government of India, is planning to procure 10,000 e-vehicles via demand aggregation.
• The government is planning to set up a committee to develop an institutional framework on large-scale adoption of electric vehicles in India as a viable clean energy mode, especially for shared mass transport, to help bring down pollution level in major cities.

Way ahead:

• The Indian automotive aftermarket is estimated to grow at around 10-15 per cent to reach US$ 16.5 billion by 2021 from around US$ 7 billion in 2016.
• It has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s Gross Domestic Product.