The Society of Indian Automobile Manufacturers (SIAM) has said custom duties on fully imported cars and engines should not be lowered as is being proposed in the ongoing free trade negotiations between India and the EU.

SIAM believes such a move would harm the auto sector to a great extent, reports PTI. While releasing a white paper on the proposed India-EU FTA and its possible consequences on the sector, SIAM said, "It has to be avoided at all cost".

"Opening the CBUs to imports/lowering import duties under the EU FTA is a retrograde step and will have a severely damaging and long term irreversible effect in several ways for the Indian economy, auto industry and consumer at large," said the paper.

It said the list of tariff lines, comprising completely built units (CBUs) and engines, should be kept in India's Negative List in all FTAs.

"The government of India has consistently maintained this policy in all FTAs, including FTAs with Japan, ASEAN, South Korea etc. These items have also been identified in the Automotive Mission Plan 2006-2016. We would like to reiterate that these tariff lines should be kept in India's Negative List under India-EU FTA."

SIAM pointed out that cutting tariff on CBUs under the India-EU FTA would be a complete reversal of the policy of high tariffs that encourages investment, local manufacturing, local value addition and local employment.

It said, "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 this sector."

The organisation added that the EU was a deteriorating market in terms of automotive exports, while India was a rapidly growing one, and so the FTA would benefit the EU and not India.

"SIAM is deeply concerned with the way India-EU FTA negotiations are taking place. From the beginning of the negotiations, EU had said that India-EU FTA cannot be concluded without auto CBUs being included in the FTA. India seems to have bowed down to this condition by EU as it is still discussing with EU despite such threat. It is understood that negotiations on reducing the import tariffs on auto CBUs are in an advanced stage."