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India-EU FTA could hurt local auto industry: Patel

Hindustan Times, India

India-EU FTA could hurt local auto industry: Patel

By HT correspondent

30 December 2011

Even as the negotiations for the impending India- European Union (EU) free trade agreement (FTA) seem to have entered the last stage, heavy industries minister Praful Patel has written to Prime Minister Manmohan Singh expressing concerns on the adverse impact of such a move on the domestic industry.

“Our policy of high tariffs along with free market access through investment is paying off well and there is no reason why we should tamper with this policy at this stage,” Patel wrote in the letter. “The automobile industry has announced additional investment plans of over $17 billion in the last 2-3 years to be invested over the next 5 years and any significant reduction of tariffs at this stage would encourage imports and adversely impact the investments and employment in the domestic industry.”

With a turnover of around $72 billion (Rs 3,81,600 crore), the domestic automobile industry employs around 15 million people (1.5 crore) in India and accounts for over 6% of the gross domestic product (GDP). Even then, only 3 of the 18 vehicle manufacturers in India make more than 250,000 cars a year and as many as 12 of them make less than 100,000 cars a year.

Currently, India imposes an import duty of 60% on all cars that come into the country as a completely built unit. Europe has been lobbying at slashing this rate by 50% for the European cars under the FTA negotiations.

“Our industry is not yet mature and therefore the policy initiative of the entire decade would go waste if tariff reductions are permitted at this stage,” said Patel.