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Imports to hurt auto parts cos

Domestic automakers are likely to source as much as half of all components in the next 3-4 years from overseas suppliers adversely affecting the growth of local auto component industry, said a study by industry body Ficci.

According to the study, elimination of Custom duties on import of auto components under Free Trade Agreement (FTAs) signed by India with other countries will induce automakers to source from overseas vendors.

Custom duty on auto parts like pistons, piston rings, bumpers, gear boxes, radiators and motorcycles are expected to be either reduced to 5% or abolished completely under India-Asean and India-South Korea FTAs.

Similar agreements with the European Union and Japan are expected to result in more imports whose share of the domestic component demand will move up from 31% currently to 50%, as per the study.

EU continues to be the largest source of imports with a share of around 35-37% in the total auto-component imports. " Share of China in component imports has increased by an alarming 4.5 times from 2% in 2004-05 to 9% in 2008-09," Ficci said in a statement.

"The government should provide fiscal incentives like interest free loans for promoting production of critical and high value added components."

Source : The Economic Times