Friday, June 17, 2011
By Pranjal Gera
Government declines to rollback duty on assembled cars
The Indian government has rejected the fresh appeal to take back the contrasting custom duty norms for the assembled cars. The European Union earlier raised the demand of duty rollback on cars assembled in India and last fortnight it was requested anew by German Chancellor Angela Merkel during her visit to India.
According to Government officials, it has been evidently articulated to EU and other government departments that there is no prospect of reviewing the rollback on differential custom duty. As a senior official alleged that there is no possibility of any review, as they are trying to fill a gap due to which the government has lost several crores of rupees. Also, with an idea of changing the connotation of completely knock down (CKD) units, which are assembled in India, in the first quarter this year, the government had augmented the custom duty to 60% which was later slashed to 30%. But before the announcement of the budget of 2011-2012, the duty was a mere 10%. The officials further added that as the negotiations of free trade pact with EU are in progress, so the government is doubtful to choose a cut in the tariff.
At present, the import duty on fully-built cars is 60%, which rose up to 110% after the inclusion of other taxes like counter-vailing duty (CVD) and other tariffs. Society of Indian Automobile Manufacturers already had protested against the addition of fully-built cars under the EU FTA earlier this year.
To generate new jobs in the automobile industry and to fetch higher investments and latest technology, the government has taken this stand. The Automotive Mission Plan (AMP) 2006-16 has also been kept in perception. The low duty and a soft stand could bang the objectives protected in AMP, together with the flow of technology.
Domestic car makers are quite content with the Government's decision but it also created a gap between the industry players.
Pawan Goenka, the automotive head of giant Mahindra and Mahindra and also the President of industry body SIAM had disagreed with the idea of lowering the custom duty on imported cars, but the other key players, mainly of luxury cars like Audi, Mercedes and BMW have backed the issue.
Some of the Global car manufacturing companies present in India which function in the lower-end of the market, debated against low tariff rates, and said that low price shipment in India is going to discourage the local manufacturing units and will not assist in creating jobs. The government sustained this view.
The AMP document overtly mentions the anticipated India-EU FTA along with others such as Asean, South Korea and Japan where the fortification would be accessible. Additionally, AMP unequivocally lists 77 items to be placed on the negative list which embrace products like engines and several components. This stuff would be barred from any tariff reduction commitments that India may embark on.
Some of the popular hatchback models in the Indian auto market are Ford Figo, Maruti Swift, Hyundai i10, Chevrolet Beat and Volkswagen Polo. Apart from these popular models, cars going to hit the Indian roads this year are Toyota Etios Liva, Maruti Cervo and New Ford Fiesta.