EU To Allow 2.5 Lakh Indian Cars At Concessional Duty Under FTA; Quota To Reach 4 Lakh In 10 Years

The European Union will allow 2.5 lakh Indian-made passenger vehicles to enter its market annually at a concessional duty of 8% under a bilateral free trade agreement, with the quota rising to 4 lakh vehicles, according to the draft text released by the EU.

These import duty concessions cover Indian-origin internal combustion engine (ICE) passenger cars and hybrid electric vehicles (HEVs) priced up to €50,000 on a CIF (cost, insurance, freight) basis.

The quota-based concessional duty (or tariff rate quota - TRQ) will be gradually reduced to 6% in the second year of implementation of the India-EU free trade agreement, the conclusion of which was announced on January 27 this year.

After that, the duty will come down to 4% in the third year, 2% in the Year 4 and then zero in the Year 5.

As per the text, the annual quota will increase gradually from 2.5 lakh vehicles in the first year to 4 lakh from the 10th year. Beyond this quota, MFN (most favoured nation) duty will come into force.

There is no quota-based concessions for cars priced above €50,000. The duty on these vehicles will come down to zero per cent in the Year 10 from 8% in the first year of the pact, which is expected to be signed later this year and may come into force from next year.

For BEV (battery electric vehicles), PHEV (plug-in hybrid electric vehicles) and passenger vehicles of any other technology except ICE and HEV, the pact provides a separate TRQ.

In this category of vehicles priced up to €40,000 CIF, the TRQ will start from Year 5. The EU will allow 27,500 vehicles at 8% import duty. The quota size will gradually increase to 60,500 in Year 9 and then to 1,25,000 from Year 14 onwards. The duty will be removed from the ninth year of the implementation of the deal.

The CIF includes the actual purchase price of the vehicle, shipping/freight cost, and insurance to the EU port of entry.

For vehicles priced above €40,000 CIF and up to €60,000 CIF, the tariff rate quota will start from Year 5 with 16,250 vehicles annually at 8%. The annual quota size will be increased to 75,000 in Year 14 and onwards, and the duty will come down to nil.

Further, for these cars priced above €60,000 CIF, the tariff rate quota too will start from Year 5. The EU will allow 6,250 vehicles at 8% import duty. The quota size will gradually increase to 13,250 in Year 9 and then to 25,000 from Year 14 onwards. The duty will be removed from the ninth year of the implementation of the deal.

As per the text, the EU would provide quota-based duty concession on certain Indian origin agricultural and processed food items.

These products include table grapes, dried onions, cucumbers and gherkins, molasses-based rum, and ghee.

On ghee, the text said that "in-quota tariff rate equal to 50% of the base rate of the customs duty in the aggregate annual quantity of 1,000 metric tons from the date of EIF (effective into force)".