Auto, wines, apples: India-EU FTA gives a gradual tariff reduction with import quota

Tariffs for automobiles and wines under the free trade agreement between India and the European Union will be lowered gradually and sensitive items including dairy and agriculture will remain excluded from the deal. The move is expected to help protect domestic industry while giving them an opportunity to expand and innovate and gain global competitiveness.

Under the recently concluded India-EU FTA, India will lower the tariffs on cars gradually from 110% to 10% with a quota of 250,000 vehicles a year. Sources explained that there are three price buckets for cars and each will have a separate quota and a gradual reduction in tariff.

ICE cars have been categorised in three price buckets: Those in the range of €15,000 to up to €35,000 will have a quota of 34,000 vehicles in the first year, and the tariff will go down to 35% from 110% in the first year. Tariff for ICE cars in the price range of €35,000 to up to €50,000, and €50,000 and above will lower to 30% in the first year. While the ICE cars in the price range of €35,000 to €50,000 will have a quota of 33,000 vehicles in the first year, those above priced at €50,000 and above will have a quota of 34,000 vehicles in the first year.

Cumulatively, the vehicle quota for ICE cars will be 1,00,000 in the first year of the FTA becoming operational and will go up to 1,60,000 in the tenth year of the FTA. The tariff will go down to 10% in the fifth year. 

Meanwhile, tariff concessions on electric vehicles will start from the fifth year onwards and the vehicle quota of 90,000 units, which will go down to 40,000 by the tenth year.

Quota on CKD for 75,000 ICE vehicles with quota duty reduction from 16.5% to 8.25% has been decided upon in the FTA. In the 10th year, the quota on CKD for ICE vehicles will be reduced to 50,000.

Official sources further explained that the reduction of duties on wines from the EU from 130% to 20%-30% will take place over a seven-year period. No concession has been provided on wines priced at less than €2.5 in order to protect interests of domestic wine producers and grape farmers.

On agriculture, officials underlined that India will not open up dairy in an FTA, adding that dairy and agricultural items including rice, wheat, corn, soya, GM crops and pulses have been kept out of the FTA with EU.

“We don’t open up sensitive agriculture items for any country in any FTA. Sometimes, some items are opened on a case to case basis,” they elaborated, adding that a small tariff rate quota may be given where there is a shortfall in production in India or where that item is not produced in the country.  

In the EU FTA, in the case of apples, EU will be able to export a maximum of 50,000 ton of apples into India, which will go up to 1 lakh ton in the tenth year of the deal. This will be at a duty of 20% and a minimum import price of Rs 80 per kg giving a landed price of about Rs 96 per kg.