EU to allow 2.5 lakh Indian-made cars annually at 8pc duty under FTA

The EU will allow 2.5 lakh Indian-made passenger vehicles annually at an 8 per cent concessional duty under the India-EU free trade agreement. The quota will rise to 4 lakh by the 10th year, with duties gradually reduced

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

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

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

The duty will then come down to 4 per cent in the third year and 2 per cent in the fourth year, before becoming zero in the fifth year.

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, the most favoured nation (MFN) duty will apply.

There are no quota-based concessions for cars priced above Euro 50,000. The duty on these vehicles will come down to zero per cent in the 10th year from 8 per cent 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 battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) and passenger vehicles using any other technology except ICE and HEV, the pact provides a separate TRQ.

For vehicles in this category priced up to Euro 40,000 CIF, the TRQ will start from the fifth year. The EU will allow 27,500 vehicles at an 8 per cent import duty. The quota will gradually increase to 60,500 in the ninth year and then to 1.25 lakh from the 14th year onwards. The duty will be removed from the ninth year of implementation of the deal.

The CIF value includes the actual purchase price of the vehicle, shipping or freight costs and insurance to the EU port of entry.

For vehicles priced above Euro 40,000 CIF and up to Euro 60,000 CIF, the TRQ will start from the fifth year with 16,250 vehicles annually at an 8 per cent duty. The annual quota will increase to 75,000 from the 14th year onwards, with the duty eventually coming down to nil.

For cars priced above Euro 60,000 CIF, the TRQ will also start from the fifth year. The EU will allow 6,250 vehicles at an 8 per cent import duty. The quota will gradually increase to 13,250 in the ninth year and then to 25,000 from the 14th year onwards. The duty will be removed from the ninth year of implementation of the deal.

As per the text, the EU would also provide quota-based duty concessions 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 there would be an “in-quota tariff rate equal to 50 per cent of the base rate of the customs duty” for an aggregate annual quantity of 1,000 metric tonnes from the date of entry into force (EIF).