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Auto industry against inclusion in India-European Union free trade agreement

With the proposed India-EU free trade agreement (FTA) in its final leg, the domestic auto industry has raised alarm bells against including the sector in the trade agreement, saying it will kill investments and technology inflow and jeopardise the targets set under the government's much-touted Automotive Mission Plan (AMP), released by PM Manmohan Singh. While the domestic industry lobby Society of Indian Automobile Manufacturers (Siam) argues against the FTA inclusion, a section of the global industry - mainly European auto companies - feel the opposition is protectionist and not in sync with current economic realities.

The house is divided at a time when there are indications that the government is looking to include the auto sector in the FTA, following which import duty on a specified number of cars may fall to 30% from the existing 60%. The government is looking at allowing cheaper import of a specified number of cars under tariff rate quota (TRQs). The concession is expected to benefit not only luxury carmakers like Audi, BMW and Mercedes, but also mainline players such as Volkswagen, Fiat, Skoda and Peugeot.

"The AMP targets were based on certain consistency in policy. If the auto industry is included in the FTA, the entire equilibrium will be disturbed and India will not meet the AMP target," said Siam senior director Sugato Sen.