Praful Patel bats for continuing current duty on car imports

April 18, 2013: Even as the 27-member state European Union (EU) pushes for a cut in the import duty levied on its cars in India, Praful Patel, the Heavy Industries and Public Enterprises minister, has called for continuation of the current tax structure on imported vehicles from Europe, as per a PTI report. Speaking on the sidelines of the 4th Clean Energy Ministerial meet held in New Delhi yesterday, he said: “We want cars to be manufactured in India so there is industrial progress and employment generation in the country. But we also think that the current tax on imported cars from EU should continue.”



Under the Free Trade Agreement (FTA), officially known as Bilateral Trade and Investment Agreement (BTIA), the EU has sought substantial reduction or even elimination of duties on export of its automobiles, particularly high-end passenger cars, to India. Indian industry, however, has cautioned against granting any such concession arguing that such an option would hit future investments. On April 9, the Society of Indian Automobile Manufacturers (SIAM) issued a white paper that had said custom duties on fully imported cars and engines must not be lowered as was being proposed in the free trade negotiations between India and EU. It stated that such a step would severely damage the sector. It called for keeping the list of tariff lines, comprising CBUs and engines, in the Negative List in all FTAs. The industry body said: “Our industry is not yet mature and therefore, the policy initiative of the entire decade would go waste if either any tariff relaxations are permitted at this stage or policy set-up tampered.”

On April 15, Commerce and Industry Minister Anand Sharma and EU Trade Commissioner Karel De Gucht concluded another round of EU-India FTA talks in Brussels. The two sides agreed that a fine balance needs to be arrived at on market access on both the sides, an issue that is bogging down progress in the tortuous negotiations for the pact. European automakers would of course prefer a free market. In an interview with Autocar Professional earlier this year, Eberhard Kern, managing director and CEO of Mercedes-Benz India, had said: “We are a very big company, we have factories all over the world and all these trade restrictions or customs tax, at the end, hinder business and lead to higher prices, but consumers have to take it. As a local entity, we are very flexible with our factory here. Even if you produce locally, you import as well the kits or the parts; so it’s anyway a global trade. So we would really like to see free trade.”

The next ministerial meeting on the ongoing India-EU BTIA is scheduled for June 2013 as experts and chief negotiators will remain engaged. India has been engaged in talks with the EU, its biggest trading partner, since June 2007 for liberalising commerce in goods, services and investment through an FTA. The two-way trade between India and EU increased to about US$ 110 billion (Rs 596,200 crore) in 2011 from US$ 83.37 billion (Rs 451,865 crore) in 2010.

Photograph (top): Union Minister for Heavy Industries and Public Enterprises, Praful Patel addressing the 4th Clean Energy Ministerial, in New Delhi on April 17, 2013 (PIB).

Photograph (centre): Union Minister for Commerce & Industry and Textiles, Anand Sharma with the EU Trade Commissioner, Karel De Gutch, in Brussels on April 15, 2013 (PIB).

Also read: Will the FTA with EU benefit India?