At least 2.5 lakh cars from the European Union (EU) will be imported into India at a duty of 10 per cent, instead of the erstwhile 100 per cent that was in place for vehicle costing more than $ 40,000. With regards to this tariff plan, there had been major disagreements between the EU and India in the past. Under this new scheme, only a specified number of vehicles will get lower duty, which will commence for a time period of 5 years beginning from 2017. This move is part of the proposed India-EU Bilateral Trade & Investment Agreement. If this agreement is violated, EU would have to pay concessional duty of 30 per cent. In addition, the new rate quota can now be applied to both small and large cars.
However, EU is still pushing for more leverage in this agreement, by asking for 3 lakh cars to be covered. With respect to this, India has now asked for some trade-off to help the country develop in other industrial sectors. No annual cap on the number of imports has been imposed as of now, but 2.5 lakh vehicles would translate into an average of 50,000 vehicles a day. Indian governing body Society of Indian Automobile Manufacturers (SIAM) states that this would mean 20,000 to 22,000 Completely Built Units (CBUs) coming from EU.
Import duty for cars imported in EU is currently at 6.5 per cent. With the new concessions, European market would open up for made-in-India vehicles. But SIAM counteracted this by saying that after the subsidy on small cars, there was no point in getting this concession, since car exports to Europe had already been stopped.
To get clarity on the agreement between the two blocs, Indian Commerce and Industry minister, Anand Sharma was intensively engaged in negotiations with European counterpart Karel de Goucht. This round appeared to be the last leg of ministerial talks, for an agreement that has been debated for more than six years now. Industry experts believe that with the solving of ties in the automotive sector, trade off in other sectors can also take place for the benefit of both parties.