Japan objects to India’s auto policy

"Such obligations were in contravention with WTO agreement," he said. As per the MoU policy framed to promote ancillary industries, any automobile manufacturer setting up shop in the country has to achieve an indigenisation level of 50 per cent of components in three years and 70 per cent in five years.

Moreover, the manufacturers have to invest aminimum amount of $50 million and neutralise foreign exchange outgo through exports. Hirabayashi said the MoU policy had become very "cumbersome" as some companies were forced to renegotiate their deal with Indian government after it was introduced towards the end of 1997.

"We want to respect the rights of each individual company. But the procedure has become very cumbersome," he said. He, particularly, cited the case of Honda Motors, which had to meet the conditions stipulated by the new auto policy though it had come into the country earlier.

"Such dilemma is being felt strongly by many foreign auto makers," he said. The Japanese ambassador said some companies even had problems in launching their operations in the country. "We want to discuss the policy with new Delhi within the established framework of WTO," Hirabayashi said.

He contended it was not possible to launch good quality models and capture the market abroad through exports if the component imports were not relaxed. "If you insist on use oflocal products, quality of the cars may suffer. But the Indian government insists on this," he said.

Despite these problems, the Japanese investors had honoured the commitments given by them, Hirabayashi said. Japan strongly feels that India is pursuing a "good"policy of open market and de-regulation. "Inspite of some swadeshi rhetoric among its supporters, we are very positive about effective implementation of the policies by both the centre and states", hirabayashi said.

Noting that Japanese companies were giving top priorityto tap the huge potential of the Indian market he, however, regretted that "red tapism" and "bureaucratic harassment" posed hurdles for prospective Japanese investors. Despite Japan’s fiscal situation not being in good shape, Tokyo was determined to remain world’s number one donor and continue with conventional economic cooperation programmes, he stressed.

He said though the Japanese government had decided toreduce Official Development Assistance (ODA) for a three-year period from1998, the trend had changed in the second year itself. While ODA for 1998 fiscal had been sliced by 10.4 per cent, it had gone up by 0.2 per cent in 1999 fiscal, he said.

He said although fresh economic cooperation from theJapanese government has remained stalled since the pokhran nuclear tests in may last, Exim Bank of Japan has been asked not to stop lending to India under ODA. While on-going projects committed by Japan were being implemented, he said private companies have also not been prohibited from carrying on business operations with India.

To a question, Hirabayashi said the recent dispute between the Indian government and Suzuki Corporation over the appointment of managing director for Maruti Udyog limited was "now behind us" following an amicable resolution resulting from personal intervention of industry Minister Sikander Bakht. "They are working hard realising they have to faceemerging competition from Hyundai, Daewoo, Tata and other car manufacturers. They have no time to waste," hesaid.