Automobile industry body SIAM Thursday cautioned that the sector will miss targets of the Automotive Mission Plan 2006-16 if it is included in the proposed free-trade agreement with the European Union for allowing imports of vehicles at lower duties.
New Delhi: Automobile industry body SIAM Thursday cautioned that the sector will miss targets of the Automotive Mission Plan 2006-16 if it is included in the proposed free-trade agreement with the European Union for allowing imports of vehicles at lower duties.
"If EU-FTA comes in, we will obviously fail to achieve the Automotive Mission Plan (AMP) targets," Society of Indian Automobile Manufacturers (SIAM) Senior Director Sugato Sen told reporters here.
The government should not change the duty structure drastically for only one region and any such alteration should be carried out only after 2016 as AMP was drafted keeping in mind the existing levies, he added.
Questioning the rationale of such move, Sen said: "What benefit are we going to get from this agreement?...The AMP is hijacked by the Ministry of Commerce."
The AMP had set a target of total revenue of USD 122-159 billion by 2016 by the Indian automobile industry. To achieve this target, the industry is estimated to be requiring investment of USD 35-40 billion between 2006 and 2016.
"As per the AMP, we require over Rs 1,50,000 crore of investment. So far, Rs 70,000-80,000 crore have been announced by different companies. Therefore, we need another 70,000-80,000 crore investment till 2016," Sen said.
However, due various policy related issues that have created negative environment, the flow of investment has slowed down in recent times, he added.
"If auto sector is included in FTA, why will anyone invest here when imports will be almost duty-free? If the investments do not come in, the we are concerned about the target," Sen said, adding French auto maker PSA Peugeot Citroen has already put on hold Rs 4,000 crore investment.
The basic customs duty has been hiked to 75 percent this fiscal, from 60 percent earlier, for fully imported vehicles priced over USD 40,000 and with engine capacity of over 3,000cc and 2,500cc for petrol and diesel driven vehicles.
SIAM had earlier said that it "understands from EU sources that India has made an offer to EU for reducing tariff of all cars" to 30 percent and "additionally a certain number of cars (much more than what EU is exporting to India today) can be exported by EU at a highly reduced duty of only 10-15 percent".
As a developing country, Indian cars can be exported to EU at 6.5 percent duty to Europe. If EU offers to reduce or abolish this duty, the Indian industry will not gain much, but if Indian duties are reduced by 50 percent or even more, it will be a substantial reduction in tariff, Sen said.
Sen said the Japanese and Korean companies present here are protesting about tariff reduction under this India EU FTA.
These companies have made India a manufacturing base and from this strong base they are today exporting to not only EU but more than 100 other countries.
Citing trade data of the Ministry of Commerce, SIAM had earlier said there exists already a trade imbalance in the automotive sector and it is heavily in favour of the EU.
"In 2010-11...EU is already exporting around USD 3.4 billion worth of cars as CBUs (completely built units) and CKDs (completely knocked down units), against India's export of USD 1.7 billion worth of cars," it had said.
Automotive products export of EU to India grew by 51 percent last year, including 109 percent growth in car exports. This is against 11 percent growth in import of automotive products from India to EU, and decline of 15 percent in cars, SIAM had said.
In the Budget for 2012-13, excise duties for cars exceeding four metres in length but engine capacity less than 1,200 cc for petrol and 1,500 cc for diesel were increased to 24 percent, from 22 percent with a fixed duty of Rs 15,000.
Moreover, the excise duty was hiked to 27 percent from the earlier 22 percent with a fixed duty of Rs 15,000 on cars longer than four metres but with engine capacity of over 1,200 cc for petrol and 1,500 cc for diesel.