The Union Minister for Heavy Industries, Mr Praful Patel, is upping the ante against the proposed sharp reduction of customs duty for cars under the upcoming India-European Union (EU) Free Trade Agreement (FTA).
Mr Patel had met the Commerce Minister, Mr Anand Sharma, in this connection, a senior Government official said. At the meeting, he is understood to have underlined the “adverse impact” of any reduction in the tariff structure on domestic investments by European car companies.
This week's meeting follows multiple letters sent to both the Commerce Minster and Prime Minister's Office starting last year, the last of which went on March 14.
“The EU enjoys a huge surplus trade in auto components of about Rs 5,000 crore,” the Minister said in the letter, while arguing against a possible reduction in import duties.
“Any concessions on tariff lines are bound to adversely impact further investment and likely to distort the market structure and dynamics to the disadvantage of companies based out of India,” he said.
EU demands
Under the FTA talks, the EU has asked for an elimination of car import duties – currently at 60 and 75 per cent (for cars above $40,000). India has reportedly offered a significant reduction between 15 per cent and 30 per cent, with a Tariff Rate Quota (allowing a fixed unit of imports at the lower rate). The ones to benefit would be the Volkswagen Group, Mercedes-Benz, BMW, apart from others such as Fiat, Jaguar Land Rover and Renault.
Additionally, the EU is also pushing for the removal of homologation and testing requirements for car imports to India, claiming that its own testing standards are more developed. Officials say that a similar incentive has not been offered in return.
“Setting up of a road map for duty reduction in the near term would lead to marked reduction in investment flow, manufacturing and adversely affect the exports and employment creation in the country,” Mr Patel said.
The FTA (or, Broad-based Trade and Investment Agreement) negotiations have faced much delay over the vast mandate and differences of the two sides and are now expected to be concluded by year end.