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2016 targets to be missed if India-EU FTA covers auto sector

Economic Times, India

2016 targets to be missed if India-EU FTA covers auto sector

10 May 2012

NEW DELHI/PTI : Automobile industry body SIAM today cautioned that the sector will miss targets of the Automotive Mission Plan 2006-16 if it is included in the proposed free-trade agreement with the European Union for allowing imports of vehicles at lower duties.

"If EU-FTA comes in, we will obviously fail to achieve the Automotive Mission Plan (AMP) targets," Society of Indian Automobile Manufacturers (SIAM) Senior Director Sugato Sen told reporters here.

The government should not change the duty structure drastically for only one region and any such alteration should be carried out only after 2016 as AMP was drafted keeping in mind the existing levies, he added.

Questioning the rationale of such move, Sen said : "What benefit are we going to get from this agreement ?...The AMP is hijacked by the Ministry of Commerce."

The AMP had set a target of a total revenue of USD 122-159 billion by 2016 by the Indian automobile industry. To achieve this target, the industry is estimated to be requiring investment of USD 35-40 billion between 2006 and 2016.

"As per the AMP, we require over Rs 1,50,000 crore of investment. So far, Rs 70,000-80,000 crore have been announced by different companies. Therefore, we need another 70,000-80,000 crore investment till 2016," Sen said.

However, due various policy related issues that have created negative environment, the flow of investment has slowed down in recent times, he added.

"If auto sector is included in FTA, why will anyone invest here when imports will be almost duty-free ? If the investments do not come in, the we are concerned about the target," Sen said, adding French auto maker PSA Peugeot Citroen has already put on hold Rs 4,000 crore investment.

The basic customs duty has been hiked to 75 per cent this fiscal, from 60 per cent earlier, for fully imported vehicles priced over USD 40,000 and with engine capacity of over 3,000cc and 2,500cc for petrol and diesel driven vehicles.

SIAM had earlier said that it "understands from EU sources that India has made an offer to EU for reducing tariff of all cars" to 30 per cent and "additionally a certain number of cars (much more than what EU is exporting to India today) can be exported by EU at a highly reduced duty of only 10-15 per cent".

As a developing country, Indian cars can be exported to EU at 6.5 per cent duty to Europe. If EU offers to reduce or abolish this duty, the Indian industry will not gain much, but if Indian duties are reduced by 50 per cent or even more, it will be a substantial reduction in tariff, Sen said.