European auto makers have slammed the Indian free trade pact, stating that the FTA will dent their lucrative prospects at their most highly protected market. The European carmakers allege that while the FTA will permit Indian-built cars immediate duty free access to the EU, it would only cut down on tariff barrier to European vehicle exports to 30%. This is meant to stay stable over an indefinite period. This has led most EU carmakers to point the barrel at the unfairness of the free trade. They feel that the Indian government is keen on restraining the 30% tariff on passenger cars with improbable hopes for re-considering the terms for change again in the year 2017.
With the EU-India summit hot on heels, EU car manufacturers are pushing their luck to bring about a positive change. In an effort to reach a consensus prior to the 12th India-EU Business Summit, scheduled to be held on February 10, 2012, the new EU ambassador to New Delhi, Joao Cravinho, met Union minister of Commerce and Industry Anand Sharma. Speaking to reporters, Mr Cravinho said that there is hard work for both sides to pursue and the aim is to make a positive announcement at the upcoming summit. He also expressed hope that the FTA would be signed in the coming month or latest by the end of the current financial year.
Cars of European make are presently levied with a 60% tariff in India, which is doubling the price of imported cars, after the value-added tax and other costs are added on. This makes European cars come up against non-tariff barriers in India, inclusive of the redundant and costly protocols on testing of items like horns and wheels. On the other hand, Indian-built cars are levied with a 10% tariff in EU which is lowered to 6.5%, based on the pretext that India is a developing nation.
Protecting local market
According to Shyam Menon, product manager at Audi West, a big-sized Audi showroom in Mumbai, “The high duty levied on imported cars makes them too extravagantly expensive when being sold in the Indian market. This eats into the buyer’s market for imported cars in India.”
European carmakers have pointed out the huge trade surplus going India’s way, as India exported 223,102 cars to Europe in 2011, but imported only 4,002 cars, as per Acea. However, India’s stance of levying high taxes on cars of European make could be taken as a sign to protect local carmakers as well as the market from being exploited.
Sectoral players will now have to wait and watch for the far reaching consequence that the India-EU FTA will have on the trade scene in the next 5 years.
Priyanka Roy Chowdhury |
The Free Trade Agreement (FTA) between India and European Union (EU) has been in news for quite sometime now. The FTA has been termed as being very progressive and extremely beneficial for the markets in both countries. However, European carmakers are not so happy with the terms of the trade agreement put forth by the Indian side.
