EU-India Import Duty: Top-end European Cars, Wine may get Cheaper.

NEW DELHI: Finally, top-end wines and spirits and automobiles may cost less with India softening its position on reducing import duty on these products shipped from the European Union.

The concessions are expected to be offered under the proposed free trade agreement that is being negotiated with EU. Official sources indicated a softening of stance after holding firm for several months. The concessions are likely to come in return for benefits in services sector as well as for products that Indian companies export to the 27-country trading bloc.

All these months, the government had not budged on the issue in the wake of protests from the domestic industry, which feared a flood of imports if duties were cut on these two product segments. But officials said that in case of automobiles, India was slowly emerging as a major production centre for small cars but it was not the case with top-end cars, which companies still found cheaper to import given the low volumes. "Lower duty on high-end vehicles will not necessarily result in a rush of imports because the market is limited," said a commerce and industry ministry official.

Customs duty on completely built cars is over 100% and the government is toying with the idea of using tariff rate quotas, which will allow only a limited number of vehicles to be imported at concessional rates. Officials also said given the problems in Europe and the loss of competitiveness, the threat from cheaper imports was lower now. Similarly, in case of wines and spirits, the move is expected to be targeted more at wine. "We do not have the grapes or the skills to produce chardonnay wines and the import of top-end of these products is not going to affect either our farmers or the wine industry," an official said.

Unlike automobiles, where the industry is split, based on the parentage considering car makers are from Japan, South Korea, Europe or the US, in case of wines and spirits, it is the domestic industry that is opposing a tariff cut. It fears a rush of whisky and vodka if import duty is reduced.

Over the years, the local players have successfully blocked significant reduction in customs duty. Officials said even if the move to cut tariffs in the EU FTA went off, the government may not lower the import duty on automobiles under trade deals with Japan and South Korea, which have already made similar demands. "Whenever you sign a new agreement, you go a step further than what you offered in the previous one," an official said.

Source : economictimes.indiatimes.com