Automobile industry body, the Society of Indian Automobile Manufacturers (Siam), today hit out at the government for discouraging manufacturing of big cars in India by increasing excise duty while preparing to allow import of the same from Europe at a much lower duty.
Siam said, while the government has increased excise duty on big cars to up to 27 per cent in the Budget, it is considering cutting import duty on such cars from Europe to as low as 10 per cent under the India-EU Free Trade Agreement (FTA). “We are faced with a higher excise duty on cars other than small cars ostensibly because they are for the rich. This has resulted in India not developing strength in bigger cars,” Senior Director Sugato Sen said.
Adding: “However, today we are hearing that government on India is thinking of allowing such cars (big ones) to come from the EU at lower import duty as part of the India-EU FTA. We don't understand the logic of such policy.”
It is, however, understood that the government is not giving in easily to the demands of the EU. "Concessions if any, by India on automobile sector will be dependent on the agriculture package negotiations," a source said.
India wants market access for its agriculture products in European markets. Both the sides are negotiating both these issues. Siam had earlier stated that it "understands from EU sources that India has made an offer to EU for reducing tariff of all cars" to 30 per cent and "additionally a certain number cars can be exported by EU at a highly reduced duty of only 10-15 per cent".
In the Budget, excise duties for cars exceeding four metres in length but engine capacity less than 1,200 cc for petrol and 1,500 cc for diesel have been increased to 24 per cent, from 22 per cent with a fixed duty of Rs 15,000. Moreover, the excise duty was hiked to 27 per cent from the earlier 22 per cent with a fixed duty of Rs 15,000 on cars longer than four metres but with engine capacity of over 1,200 cc for petrol and 1,500 cc for diesel. However, the basic customs duty was hiked to 75 per cent from 60 per cent for fully imported vehicles priced over USD 40,000 and with engine capacity of over 3,000 cc and 2,500 cc for petrol and diesel driven vehicles.