India-EU FTA: Lower tariffs on 1L car imports per year
What's the story
The draft text of the India-European Union (EU) free trade agreement (FTA) has revealed, that the deal will allow EU automakers to import up to one lakh passenger vehicles here annually at concessional duties. The tariff-rate quota (TRQ) will gradually rise to 1.6 lakh units from the 10th year of implementation. The concessions apply to internal combustion engine (ICE) and hybrid electric vehicles (HEVs) from the EU, with duty rates based on vehicle cost, insurance, and freight value.
Tariff adjustments
In-quota duties for vehicles priced between €15,000 and €35,000
The FTA's concessions are applicable only to vehicles priced at €15,000 (₹16.6 lakh) or above.
For cars priced between €15,000 and €35,000 (₹16.6 lakh-₹38.8 lakh), the in-quota duty will be reduced from 110% to 35% in the first year and then gradually reduced to 10% by the fifth year.
For vehicles priced above €35,000, the duty will be reduced from a most favored nation (MFN) rate of 66% to 30% in the first year and then gradually lowered to 10%.
Quota expansion
Total TRQ for ICE and non-plug-in hybrid PVs
The total TRQ for ICE and non-plug-in hybrid passenger vehicles will gradually increase from one lakh units in the first year to 1.6 lakh units from the 10th year of implementation.
The quota will be divided into three price bands, with a significant portion reserved for high-priced vehicles.
India will also lower tariffs on EU-origin cars imported beyond this quota, although these preferential rates would be higher than the in-quota duties.
Vehicle categories
CKD, other technologies to be included from the 5th year
The FTA also provides a separate tariff-rate quota for completely knocked-down (CKD) ICE and hybrid cars.
This quota will remain at 75,000 units annually for the first five years before gradually declining.
Concessions for electric vehicles, plug-in hybrids, and other eligible technologies will start from the fifth year of the agreement.
These concessions would only apply to vehicles priced at €20,000 (around ₹22 lakh) or above.