News and Events

India may protect auto companies in EU pact

Indian automakers may manage to retain some protection from cheaper imports for another five years. Amid demands for lower tariffs on imported automobiles under the India EU trade agreement, which is under negotiation.

Officials said the government has committed to retain protection for the auto sector under the Automotive Mission Plan 2006-16.

In fact, the document has explicitly cited the proposed India EU FTA along with others such as ASEAN, South Korea and Japan where the cover would be available. In addition Automotive Mission Plan, where industry inputs were sought, had explicitly said that 77 items would be on the negative list, which included products such as engines and several components.

These items would be excluded from any tariff reduction commitments that India may undertake. The Automotive Mission Plan, among other things, aims to spur investment in the Indian auto sector as the government wants to double its contribution to the GDP to over 10% by 2016 while creating as many as 25 million new jobs.

While the move may come as a relief for many of the homegrown manufacturers, it will act as a dampener to the expectations of foreign players , particularly the luxury makers, who have been jolted by the government's decision to hike customs duty on assembled cars to 30% from the 10% level prior to the Budget.

The inclusion of automobiles in the FTA has already split car makers with Mahindra & Mahindra's Mr Pawan Goenka, who is also the president of industry body Society of Indian Automobile Manufacturers (Siam), opposing any move to cut duty on imported cars while several members, including foreign luxury car makers such as Audi , Mercedes and BMW, batting for lower tariffs.

For years, homegrown players have opposed any move to lower tariffs on imported automobiles, arguing that cheaper shipments into the country would not result in local manufacturing and job creation.

(Source: ET)