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EU wants a deal for auto firms before India FTA talks

The European bloc is pushing for a package for its embattled auto sector. India has agreed for the setting up of a working panel to discuss the issue

business Updated: Apr 30, 2016 02:18 IST
Timsy Jaipuria
Timsy Jaipuria
Hindustan Times
BTIA,European Union,EU-India
A model poses with Renault’s Duster car during the 2012 New Delhi Auto Expo. It has been one of the few European cars to catch public imagination in India, but a special deal would help companies bring prices down.(AFP file photo)

Even as the European automobile majors have already gained a strong foothold in the Indian market, the European Union (EU) wants New Delhi to first negotiate “a comprehensive auto package”, before the two sides resume their talks on the delayed free trade agreement.

According to sources, EU has made it clear to India that the 28 nation bloc intents to start the negotiations on the bilateral trade and investment agreement (BTIA) only once India offers “further market access with a relaxed duty structure” for automobiles and the auto component sector.

Confirming the development a top commerce ministry official said that “both the sides are keen to close the trade agreement. They (EU) want to first settle an auto deal before starting negotiations on other areas. We are open to talks.”

Commerce and Industry Minister Nirmala Sitharaman during her visit to Brussels last month met with the senior members of the Union and had said that both India and EU will soon begin trade talks.

“India had last time in 2013 closed the negotiations on automobiles with EU by offering lowered duties on imports of European cars but imposed a quota restriction. However EU later on rejected the offer and wanted a zero duty access to Indian auto and auto component market, which is not acceptable to India,” the official said.

However, it is understood that India has now proposed to set up a working panel with the EU, which would involve both Indian and European auto players to further deliberate on the issue. “Not just the duties but India will also talk keeping in mind the Make in India drive where automobile and auto component sectors are notified in the top 25 sectors for job creation and increasing manufacturing units in India,” the official added.

Once a deal is clinched, the moves could lead to further diversification of the Indian car market, which already has a robust portfolio from European players. Not only those carmakers who don’t have manufacturing units in India (such as Peugeot or Ferrari) but those that manufacture some of their cars in India (such as Volkswagen, Renault and Skoda) would also benefit from a special regime is accorded to the EU under the proposed pact.

Significantly, no such concessions are given to auto majors from Japan, South Korea and Asean countries under similar existing pact. Though, this is also one of the major reasons why India cannot give out a better deal to EU.

First Published: Apr 29, 2016 23:28 IST