Auto St cheer: Duties won’t be lowered in EU FTA deal

The automobile industry can heave a sigh of relief.

Heavy industries minister Praful Patel has assured that import duties would not be lowered in the India-EU Free Trade Agreement (FTA) and the interest of domestic original equipment manufacturers would be protected.

The department of heavy industries has already recommended a status quo on import duties for vehicles and components to the commerce ministry.

As of now, import of cars and sports utility vehicles (SUVs) attracts 60% duty but with various other levies such as countervailing duty and VAT, it comes to over 100%. So completely built unit (CBU) vehicle imports are done at almost double the orginal price. While domestic vehicle makers had been opposing any lowering of duties, luxury car makers (which do the bulk of CBU imports) were all for this provision.   

If EU’s demands are accepted despite the recommendations of Patel’s ministry, luxury brands such as BMW, Audi and Mercedes could become over 30% cheaper.

EU’s lower duty demand has also not found favour because Korean and Japanese carmakers do not enjoy cheaper imports and any such provision was being seen as discriminatory. Companies such as Toyota, Honda and Hyundai would be at a disadvantage against European car makers in case EU’s demands were accepted.

Earlier, supporters of the EU proposal have argued that FTA with EU will help Indian auto component makers to export in European countries but with Europe’s tough quality standards, this appears unrealistic.