The duty cuts on imports may actually destroy the Automobile
sector completely.
The Society of Indian Automobile Manufacturers (SIAM)
recently warned the government not to reduce the taxes levied on the fully
built cars and power mills that are imported from European Union. The proposal
for this reduction was recently presented during the free trade negotiations
that were being held between India and EU. The duty cut on car imports from EU
will not be in favor of India in SIAM’s opinion. This will affect the
respective sector in a very adverse way. SIAM is strongly of the opinion that the Government must
completely rule out this possibility as this will do no good to Indian
manufacturers as well as the industry itself on a long term basis. It will
severely affect the economy of the country, consumers, and the auto industry on
a whole. The list that contains tariffs for CBUs as well as power mill should
be included in the black list that has been proposed under the India – EU FTA.This position has been maintained by India under all FTA’s
that India has yet signed with several developed countries like South Korea,
ASEAN, and Japan. All these tariff lines must be kept in the India’s Negative
List that will be prepared under India-EU Free Trade Agreement.
These reductions if confirmed will be a complete opposite of
the high tariff policies that is being implemented in order to enhance local manufacturing,
investment, local employment, and value addition. This move will endanger the
entire motive of the 2006-16 Automotive Mission Plan as many of the investors
are already backing off due to non- clarity of tariff reduction plans. The organization also remarked that the EU market is facing a
steep decline in terms of Automobile exports while India on the other hand is a
booming market, so under such condition if we are letting our guard down in
terms of import duties and taxes, the one that will be in loss will be India
and not European Union. SIAM has shown deep concern on the direction in which the
India – EU negotiations may take. As since the negotiation rounds have begun,
EU has tried to pressurize India with the condition that the negotiations
wouldn’t be concluded unless India nods to addition of CBUs in FTA list. And
Indian Government to have given under this pressure as the talks are still
continuing despite the threat. So it can be clearly inferred from this point
that the negotiations for reduction in import duties have already headed to its
destined direction.
Apart from this, SIAM has also shown deep concern over the
concept of ‘non-new goods’ that has been introduced recently. As SIAM likes to
tell us that the EU has asked India to back-off from the non-new good demands
and requirements that also includes enforcement measures that may later
restrict new goods. India is thus being considered under pressure to make any
demands in respect to CBU business. Negotiations are going on for elimination of 50 percent tariff
on all cars. This means that the tariff rate to be reduced from 60 percent to
30 percent. Also it has asked for a special quota under which specific cars
will be exported to India at just 10-15 percent tariffs. In the year, 2010 -11, EU exported a large number of cars to
India as CBUs and CKDs. The total worth of these cars was equal to roughly $3.4
billion. On the other hand, India exported $1.7 billion worth cars to Europe.
The imports from Europe have increased in last two years from 5, 000 cars to
17, 000 cars.
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