Import Intensity of Foreign Affiliates and Local Enterprises : Auto Ancillary Industry

Firms operating with foreign collaborations (FCA units) have been facing a high degree of dependence on the parent MNEs (Multi-national Enterprises) compared to their local counterparts (Non-FAC units) owing to reasons like larger imports of raw materials, machinery, equipments and spares by virtue of tied-up purchases. In the light of this statement, the study makes an attempt to investigate the import intensity and the phenomena of excessive imports and overpricing in FCA units in relation to that of the Non-FCA units in the Indian automobile ancillary sector. Amongst the 84 units covering a wide range of automotive ancillary firms under the study, 33 units operating with foreign collaboration revealed that the import intensity was not only highest in the FCA units having high foreign association but also increased with the number of foreign collaborations. The findings reveal that the industry in question has been subjected to excessive imports at exorbitant prices (under the mechanism of Transfer Pricing), from their collaborators abroad leading to higher import intensity of such units. Study revealed that, firstly the average import intensity was directly varying with the degree of foreign association on the one hand and secondly, more import intensive firm were less export oriented on the other. Study, thus concluded that the imports under foreign technology transfers had been made at the distorted prices and the manipulated prices in most of cases were exorbitant or high