The Hindu Business Line : Asean FTA: Lower tariffs worry auto industry

New Delhi, July 15 Ahead of official-level talks in Vietnam this week on the proposed Indo-Asean Free Trade Agreement (FTA), the domestic automobile industry has decided to convey to the Government its concern over the likely move to place passenger cars and auto components under the sensitive list.

It is keen that passenger cars and certain auto components are kept under the negative list in the Indo-Asean FTA.

Both India and Asean are understood to have agreed on the negative list that covers the respective sensitivities of both sides. The negative list includes items for which tariffs are non-negotiable as against the sensitive list containing commodities on which tariffs would be brought down to maximum 5 per cent.

Sources told Business Line that the Society of Indian Automobile Manufacturers (SIAM) and the Auto Component Manufacturers Association (ACMA) are likely to present their views to the Commerce Ministry next week. They also said that under the proposed FTA, the import duty on certain models of passenger cars could come down from 60 per cent to 5 per cent. This would result in higher imports of vehicles and auto components, and threaten the competitiveness of domestic manufacturers, who are reeling under high cost of operations, industry sources said. They said this could also be extended to other categories like commercial vehicles or two-wheelers.

ACMA had earlier too expressed concerned that a reduction in import duty would lead to the problem of inverted duty structure in which the cost of importing raw material is higher than the finished goods. This could also lead to diversification of future investments in India, said ACMA President Mr Vishnu Mathur. According to the Automotive Mission Plan, India needs to attract $35-40 billion investments by 2016 to emerge as a global automotive hub. However, with tariff reduction the domestic industry foresees competition from countries in South East Asia such as Thailand.

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