New Delhi: Ahead of ministerial level talks on the proposed free trade agreement between India and EU, the Heavy Industries Ministry has said a "calibrated" import duty reduction on passenger cars from Europe can be considered at a later stage.
During a recent discussion between Commerce and Industry Minister Anand Sharma and Heavy Industries and Public Enterprises Minister Praful Patel, the latter has cautioned that the interest of the domestic industry needs to be protected but a duty cut can be considered in a calibrated approach.
"Yes, we had a meeting wherein our department has re-iterated its stand that the interest of domestic manufacturers needs to be protected. If the government has to consider a duty reduction, then it can be considered later in a calibrated manner," Patel said.
The domestic automobile industry is strongly opposing any move to reduce import duties in the automobile sector.
India and the 27-nation European Union (EU) bloc have not made any major progress despite intensely negotiating the Bilateral Trade and Investment Agreement (BTIA) since June 2007.
Sharma and his European Union counterpart Karel De Gucht are scheduled to meet this month to review the progress of the negotiations.
Besides other concessions, the EU wants reduction in the basic custom duty on cars.
Already 14 rounds of negotiations have been held so far.
If India would give duty concessions, then it is expected to benefit not only luxury carmakers like Audi, BMW and Mercedes, but also mainline players such as Volkswagen, Fiat, Skoda.
In the Budget for 2012-13, the basic customs duty has been hiked to 75 percent from 60 percent, for fully imported vehicles priced over USD 40,000 and with engine capacity of over 3,000 cc and 2,500 cc for petrol and diesel driven vehicles.
The 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.
Society of Indian Automobile Manufacturers (SIAM) has been cautioning that the sector will miss targets of the Automotive Mission Plan 2006-16 if a duty reduction is included in the proposed BTIA.
Such a move will be a total reversal of the policy of high tariffs to force investment, local manufacturing, local value addition and local employment and will not result in any benefit to the Indian auto-manufacturers, SIAM had said.
Japanese and Korean companies present here in India too are protesting about tariff reduction under the pact.
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.
According to the trade data of the Ministry of Commerce, there already exists a trade imbalance in the automotive sector and it is heavily in favour of the EU.
EU is already exporting around 43.4 billion worth of cars as CBUs (completely built units) and CKDs (completely knocked down units), against India's export of 41.7 billion worth of cars.
The 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.