Indian domestic auto manufacturers have sounded a warning against the Indian government entering into free trade agreements (FTAs) and preferential trade agreements (PTAs).

The industry has hammered out a comprehensive draft detailing implications for the auto and components industries of the government’s proposed FTAs with Singapore, the Mercosur countries (South America) and the Asean (Far East) region.

The large auto firms want fully-assembled vehicles (CBUs) of all types, including commercial vehicles, and vehicle engines on the negative list of FTAs. This implies that CBUs will not be imported at zero percent duty as part of the agreement between India and the FTA/PTA partner.

India has entered into important FTA with Thailand. The auto industry’s demands are based on the fact that the Indian industry is in an evolving stage, and internal reforms are still not complete.

It is estimated that there is a cost disadvantage of 12-17.5% between India and most Asean countries, including Thailand.

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India has also signed a framework PTA with the Mercosur countries of Argentina, Brazil, Uruguay and Paraguay, which is likely to be converted to an FTA over the next few years. The Indian industry has again demanded that CBUs and engines be placed on the negative list.

Automobile manufacturers have also demanded that imported vehicles from FTA partners should not be exempt from any requirements for import of automobiles such as homologation of vehicles and emission standards.

The Indian market shares many common models (currently manufactured in India) with the Asean and Mercosur markets and a free import of CBUs from these into India is likely to hurt the manufacturing industry. Models like the Opel Corsa, Honda City, Fiat Palio and Ford Ikon are also manufactured in these markets and their import could hurt the carmakers in India.

The Indian component industry is studying the effect of FTAs and PTAs, especially with Thailand, as an influx of cheaper parts will hurt the sector badly.

Deepesh Rathore / Tilak Swarup