Official Website of Automotive Component
Manufacturers Association of India

Vol. 7 No.7 July / August / September '99


From the President's Desk


Dear Member,

At the outset, I would like to thank you for reposing confidence in me and electing me as President, ACMA for 1999-2000.This is my first communication with the membership at large and I would like to start off by outlining ACMA's views on Government policy specially as the WTO deadlines are fast approaching.

Over the past one or two issues, the ACMA President has communicated to you regarding the impact of WTO on the component industry which may bring up a future regime without a Government driven "localisation policy" and free import of vehicles including second hand vehicles.

Localisation policies (MOUs) will have to be removed latest by September 2000. While this does pose a threat to the industry, all is not lost. We have enough time even now to gear up to face free global competition. Bound rates of tariff of 40% are valid till 2005 and there should be no need for Government to reduce tariffs below the Bound rates if it is not in the interest of the domestic manufacturers. ACMA's strong plea to Government would be not to hurry up with tariff cuts in the component industry till 2005.

However, maintaining tariffs can only buy us some more breathing time. We will have to accept reductions in tariff over a period of time and prepare to face competition from cheap imports. In the long run, the only incentives for local value addition can be subsidies related to Research & Development. Companies need to take not of this and start giving more attention to R&D right now.

Another issue which has concerned everybody in the component industry recently is the subject of global Copyrights and Patents.

Traditionally, the Indian industry has thrived on its expertise in reverse engineering. We are probably the best "reverse engineers" in the world along with the Koreans and Taiwanese. Over the decades, patent and copyright laws were seen as an impediment to internal competition and as encouraging monopolistic forces. At that time, it was in our National interest to ensure that no single organisation took control of the market under the protection of Patent or Copyright Laws. However, the emerging world order has overturned all our traditional perceptions and beliefs and today, each and every one of us will have to conduct our business within the boundaries of internationally acceptable laws.

Our reverse engineering approach will need to be somewhat tempered. The international laws have become strict and stringent, often making such activity unlawful and punishable, particularly, in cases where the designs or technologies have been patented or copyrighted by the original owners of the technology anywhere in the world. Neither the product nor the design can be copied without a legal agreement with the original owner. Whenever such cases arise, it is often due to ignorance of international laws or inadequate understanding of the potency of these laws.

No doubt, reverse engineering will remain an effective method for aftermarket exports. However, companies, now need to be more aware of their legal positions. They will have to make a more critical assessment of their own product or process and ensure that they have legal rights to sell the product or technology. The international law is very unforgiving and can take extreme penal actions, if invoked - justified or unjustified.

The sooner the industry becomes savvy on this issue, the quicker will we be able to integrate into the world economy.

V.K. Mehta