Indo-EU FTA To Cut Import Duty, Local Players Disagree.

The domestic auto industry has locked horns with foreign carmakers. And this time, the fight is over the possible reduction in import duty for cars in the upcoming Indo-EU free trade agreement, reports CNBC-TV18’s Swati Khandelwal Jain.

When India and the European Union sign the free trade agreement which has been under discussion since 2007, it will mean lower duty on imports of cars. This has domestic carmakers in a huff. They oppose the lower duty, citing competitive disadvantages.

Pawan Goenka, President, SIAM said, “We should be encouraging manufacturing in the country and not import in the country because manufacturing will generate employment and investment and thus provides economic growth to the country."

But players who are largely import dependent, like Audi, Mercedes and BMW, disagree.

Said Michael Perschke, MD, Audi India, “There is no industry above 2000-2500cc in India for larger cars to come in, it will spur demand and in total there will a positive business case.

Foreign players argue that currently, imports carry a 60% duty levy. And this amount grows to 110% once countervailing duty, VAT and other local taxes are levied. Audi India is pushing for lower duty, especially on cars above 2,000cc. It says there is no fear of the domestic industry being cannibalised, since 80-90% of the Indian car market is below 2,000cc. It adds that lower duties will bode well for Indian players as well.

Perschke said, “Leverage expert capabilities and get access to the European markets. There is something you have to give to the Europeans. It has to be a win-win situation. You cannot export cheap small cars out of India and at the same time be protective of anything that is imported."

But SIAM says it is not being protectionist. Goenka said, “They have put in plants in Chennai, plants in Jharkhand, and many new plants have come in. Investment is on the ground, for them also the import is perhaps not a desirable thing.

Luxury car maker BMW goes one step further. It says even completely knocked down products -- where parts are imported and assembled in India -- should also attract lower import duties.

Source : moneycontrol.com