India seeks comments on draft National Auto Policy

India’s Department of Heavy Industry last week released a draft National Auto Policy, which seeks to promote clean and safe mobility and adopt a long-term roadmap to harmonize emission standards with global benchmarks by 2028. The agency is seeking comments on the draft which is due by 26 February.

The objective is to provide a long-term, stable and consistent policy regime and to have a clear roadmap for the automotive industry.

The last National Auto Policy, released in 2002, was the first comprehensive policy for the automotive industry in India, created with the vision of establishing a globally competitive automotive industry in India and doubling its contribution to the economy by 2010.

“While the industry prepares to meet the BS VI timeline, it is important to provide visibility on emission standards even beyond BS VI, to enable the industry to plan its technology and investment roadmap. The policy therefore proposes to roll out a comprehensive long-term roadmap for the automotive industry,” according to the draft document.

It also proposes to define emission standards that will be applicable after BS VI with a target of harmonizing with the most stringent global standards by 2028, across all vehicle segments, and the introduction of the new norms starting in 2026 with a two-year phase-in period.

The proposed policy aims to drive R&D efforts in the automotive sector towards indigenous research, design and engineering in both automotive vehicles and components.

Summary of Key Recommendations:

– Develop a comprehensive long-term roadmap for the automotive industry

  • Define the emission standards that will be applicable after BS VI with a target of harmonizing with the most stringent global standards by 2028, across all vehicle segments
  • This roadmap will in turn enable the industry and support agencies to define the requirement of technologies, testing facilities, skill development and plan long-term investments

– Develop a roadmap for reduction in CO2 emissions through Corporate Average Fuel Economy (CAFE) regulations

  • Roadmap will define corporate average CO2 g/km targets for all passenger vehicle manufacturers from 2020 onwards. Vision will be to match CO2 targets set by developed countries by 2025
  • Introduce economic penalties for manufacturers that do not meet corporate average targets
  • Evaluate mechanism for flexibilities and provisions such as banking and trading of emission credits

– Introduce a composite length and emissions based criterion for vehicle taxation

  • Rationalize the GST structure for automobiles that is currently based on length, engine displacement, engine type and ground clearance
  • Replace the current classification criteria with a composite criterion based on vehicle length and CO2 emissions
  • Vehicle length-based classification will target reduction in vehicular congestion and CO2 emissions based classification will align with the overall vision of green mobility and reduction in greenhouse gas (GHG) emissions
  • Define thresholds for length and CO emissions with the objective of neutralizing impact on GST revenue
  • Monitor and review the thresholds based on market evolution and target of increasing share of greener vehicles

– Achieve harmonization of standards over the next five years

  • Define a roadmap for harmonizing key standards and testing methods with global benchmarks
  • Upgrade agencies like ARAI and NATRiP, in line with the harmonization plan, to develop capabilities at par with global testing and certification agencies
  • Evaluate accession to the UNECE WP.29 1958 agreement within the next five years, which will eliminate a major technical barrier to trade

– Implement measures to increase exports of vehicles and components

  • Conduct a detailed study of business environment, procedures, infrastructure etc. in export dominant countries such as China and Japan to identify areas of improvement in India
  • Identify and initiate trade agreements with countries having attractive markets for Indian automotive exports
  • Consider phased increase of duty credit scrips (from 2%) for export of vehicles and auto components in line with comparable products to target countries under Merchandise Export from India Scheme (MEIS)

– Improve skill development and training eco-system

  • Increase the accountability of Automotive Skills Development Council (ASDC) through performance-based funding linked to metrics such as incremental employment generated, level of employment, curriculum coverage, industry feedback etc.
  • ASDC to implement a Labor Market Information System (LMIS) for aggregated information of certified candidates and serve as a marketplace to match demand and supply of skilled labor

– Conduct a detailed study to assess the logistics challenges being faced by the auto industry

  • Based on the results of the study, support the development of a world-class logistics infrastructure

– Scale-up indigenous R&D with commercially viable innovations

  • Set-up a ‘Technology Acquisition Fund’ to acquire technologies through licensing agreements, joint ventures or acquisitions
  • Incentivize Public Private Partnership (PPP) based industry investments in research and development of commercially viable technologies through a Hybrid Annuity Model (HAM)

– Implement an outcome-based funding scheme for Industry-Academia collaboration

  • Vision of the scheme will be to promote innovation in technologies and processes that have a direct impact on the automotive industry and have high commercialization potential
  • To be applicable for funding, the proposed project should have been initiated by industry or jointly by the industry and academia
  • Funding pattern for selected projects will be 25% by industry and up to 50% by DHI

– Propose and implement tax exemption on different levels of R&D expenditure

  • Implement tax exemption on different levels of R&D expenditure
  • Define applicable R&D expenditure heads and mandate audits by statutory auditors to verify R&D expenditure for companies to qualify for exemption

– Develop capabilities and technology improvement in identified areas for auto component manufacturing

  • Based on technology roadmap, identify the critical components for which domestic capacities and capabilities need to be developed
  • Encourage FDI in coordination with Invest India to attract investments in identified areas
  • Support auto component cluster development programs in identified areas of development
  • Establish shared training and testing facilities at these clusters for technology and skill development

– Harmonize AIS and BIS standards for safety-critical auto components

  • Evaluate the need for dual standards – AIS for OE components and BIS for aftermarket components
  • Reduce discrepancies between AIS and BIS for safety-critical parts
  • Create a roadmap for harmonization of AIS and BIS standards on safety critical parts over next three years, with eventual target of single standards

– Offer fiscal support for technology improvements in auto components sector

  • Lower import duties on capital goods, equipment and machinery for manufacture of new technology components
  • Use the ‘Technology acquisition fund’ for development and acquisition of critical technologies and drive cluster level technology improvements
  • Use ‘Technology acquisition fund’ for providing import duty exemption on auto component prototypes. Companies will have to declare at the beginning of every financial year the volume of prototypes planned to be imported. Duty exemption will be given only on the pre-declared volume.
  • Define limits for overall imports of prototypes based on total value and volume
  • Define a list of target technologies with corresponding components and equipment that will be eligible for import duty reduction

– Support readiness and fast track adoption of Bharat New Vehicle Safety Assessment Program

  • Upgrade facilities and develop expertise at NATRiP as per requirements for testing as per BNVSAP
  • Mandate fleet purchases in identified public and private sector (taxis, rental cars etc.) to be of minimum BNVSAP rating

– Define a green mobility roadmap for India

  • Finalize a technology agnostic green mobility roadmap through evolution of emission regulations
  • Define the long-term roadmap for incentives and infrastructure investments for green mobility

– Drive demand by expediting adoption of green mobility in the public domain

  • Mandate minimum share of green vehicles among new vehicles purchased by central and state government agencies and municipal corporations
  • Use the Government e-Marketplace (GeM) portal to aggregate all green vehicle orders with standard specifications over three months and enable bulk procurement

– Plan an advanced and extensive green mobility infrastructure network

  • Conduct a detailed study on requirement of public infrastructure for green vehicles
  • Based on the study, define a national plan for establishment of public infrastructure for green vehicles

– Ensure upgrades of test facilities in alignment with technology roadmap

  • Establish an investment and upgrade plan of test facilities in India, aligned with overall industry roadmap Long-term outlook will enable autonomous research and testing agencies such as NATRiP and ARAI to plan and setup capabilities for development and testing at the right time