The import duty relaxation for luxury cars from the European Union (EU) under the proposed India-EU free trade agreement will come with riders, including a cap on the number of cars allowed to enter the Indian market from Europe by using the low tariff regime. The commerce ministry is actively considering a proposal to put country-wise caps on the number of cars that can be exported to India by the EU nations.
The move is aimed at protecting the domestic automobile industry from any adverse impact of the availability of cheaper European cars in India, say senior officials in the commerce ministry. In return, India is set to push for lowering of taxes on small cars going to European countries.
“Quantitative restriction on the number of vehicles to be shipped in from EU could be a way out since India-EU FTA is a priority,” a senior official in the commerce ministry told FE. Under the proposed free trade pact, EU has demanded an import duty relaxation, especially on luxury cars with minimum engine capacity of up to 1,500 cc, to 30% from the existing 60% but the Indian government till now has not agreed to the same so far, official sources said.
“India may put restrictions on the number of cars exported by the automobile companies in EU. For example, we will fix a quota upto which a German or French automobile company can export cars every year,? the official said. Besides, we can also propose a caveat whereby India will be allowed to export small cars to the EU with a relaxation in the duties and with a greater market access, the official said.
EU is India’s largest trading partner with bilateral trade between the two aggregating to to $75 billion in 2009-10. India and the EU have already completed 10 rounds of negotiations, which started in June 2007. FE had earlier reported that the India-EU FTA was likely to be sealed by early 2012.
The Indian auto industry has expressed concern over any such duty reduction, which has been also a reason behind the delay in the negotiations with the EU.
India has also been seeking greater access for the services sector in EU, in return for the duty relaxation in the automobiles.
On being asked how probable is it that EU will agree on a restricted relaxation, the official, referring to the India-Japan FTA, said ?two sets of rule can not be applied for signing two FTAs?.
