Auto dealers are about to join an exclusive league of Indians who are allowed to import cars worth more than $40,000 without having them completely road tested for Indian conditions.

The refitting process which is called homologation and which involves having numerous parts of the car ripped out and changed, can cost up to Rs 15 lakh (Rs 150,000).

A clarification issued by the directorate general of foreign trade today explains that dealers will also be included under the new liberalised rules about auto imports.

Under the new rules individuals and beneficiaries of the Export Promotion Capital Goods Scheme can import cars without the mandatory homologation certificate from the Automotive Research Association of India, Pune.

Cars costing over $40,000 (FOB value) will, however, require a certificate from the originating country certifying that the car meets European Emission norms.

The move is expected to benefit anyone purchasing imported cars that cost over Rs 36-37 lakh (Rs 3.6-3.7 million) since the homologation cost will not be included in the cost of the vehicle.

However, one loser in the wake of this new scheme will be DaimlerChrysler which has set up a plant in India. The biggest winners are expected to be companies like BMW and Bentley Motors.

Officials said that the commerce ministry decided to include only cars that cost over $40,000 since expensive cars are not being manufactured or assembled in India and domestic industry would not be affected.

At the same time, they added, the more expensive cars are likely to have better safety features like air bags that are not available in the lower segment vehicles manufactured in some countries.

As a long term measure to help individual importers save the hassle of undergoing homologation the commerce ministry is contemplating signing bilateral mutual recognition agreements which to recognise roadworthiness norms in India and the other signatories.

Another option being explored may be to join a multilateral framework.

Officials, however, said that before India entered into such agreements it would require to upgrade testing standards so that they are comparable with the levels in developed countries like the United States and the European Union.