SIAM says India-EU FTA against 'Make in India'

The proposed India-European Union (EU) trade liberalisation pact will not benefit domestic automobile firms and runs counter to the 'Make in India' campaign, the Society of Indian Automobile (SIAM) has said. India should keep the labour-intensive sector out of the purview of the free trade agreements (FTAs) particularly the proposed pact with the 28-nation EU bloc, SIma's white paper states.

SIAM has stated that FTAs with competing countries do not benefit Indian automobile industry; it is against the concept of 'Make in India' for local value addition and local employment and as such completely built units (CBUs) of vehicles and engines should be kept in India's negative list under India-EU FTA. Sectors under the negative list of any FTA are protected from any kind of duty reduction. This will jeopardise the entire Automotive Mission Plan 2006-2016 targets since already some manufacturers have started withholding investment because there is no clarity with respect to tariff reduction in auto sector, SIAM said.

Arguing that from the proposed pact, India will not gain anything but lose significantly, SIAM said that the duty in the EU is only 10 per cent against India's import duty rate of 60-100 per cent on cars.

"Indian cars can already be exported at 10 per cent duty to Europe. Obviously, India will not gain much by further reduction of EU duties for our cars but if Indian duties are reduced by 50 per cent or even more, it will be a substantial reduction in tariff. The gains will clearly be for the EU industry," SIAM added.

In 2013-14, the EU exported $1.6 billion worth of auto products to India, including $170 million worth of CBUs.

On the other hand, India's exports to EU stood at $1.2 billion worth of car CBUs, it said. This makes the trade balance in favour of the EU even without the FTA being operational, SIAM said.

Imports of CBUs from EU increased from 5,000 larger cars in 2009-10 to 11,000 in 2010-11. Imports of completely knocked down increased from 17,000 units. Reduction of tariff on CBUs under an India-EU pact will be a complete reversal of the policy to attract investment in local manufacturing, local value addition and local employment.