India is moving towards allowing imports of at least 250,000 cars from the EU at a concessional tariff of 10%. At present, European automakers have to pay 100% customs duty on vehicles that cost more than US$40,000.

A tariff rate quota implies that imports of a specific number of products will be allowed at a lower duty. In this particular case, the quota can be used over a period of five years, starting 2017, under the proposed India-EU Bilateral Trade and Investment Agreement. There is no annual cap, but 250,000 cars translate into imports of 50,000 units a year. The tariff rate quota will apply to small and large cars. If the quota is breached, European automakers will have to pay a concessional duty of 30%, reported the Times of India.

The Indian government has not agreed to EU demands for a 300,000 vehicle quota so far but there are indications that there may be a trade-off that will benefit other sectors of India.

India's heavy industries minister Praful Patel supported the current tax structure on vehicles imported from Europe, saying: "We want cars to be manufactured in India so there is industrial progress and employment generation in the country. But we also think that the current tax on imported cars from EU should continue."

Sources said the concessions from India would also open up the EU market for Indian made cars as the bloc has agreed to phase out import duty from the current 6.5%. However, the Society of Indian Automobile Manufacturers (SIAM) considers the move meaningless since car exports to Europe had come to a halt after a subsidy was provided for small cars.

The Indian government rejected a proposal from the EU to provide further concessions for auto components as there was no relaxation on environmental rules.