Auto parts industry opposes FTAs

Says the existing free trade agreements have resulted in inverted tariff structures and adversely affected domestic manufacturers.

India is on the verge of signing a Free Trade Agreement (FTA) with the European Union (EU), but a concerned auto component industry has started raising its voice against such agreements because they have adversely affected domestic manufacturers, dominated by small and medium enterprises (SMEs).

According to the Automotive Component Manufacturers Association (Acma), the nodal agency for the Indian auto component industry, representing over 600 companies, most of the existing trade agreements have resulted in inverted tariff structures.

“The issue is that the FTAs should not result in inverted tariff structures. Most FTAs that we have signed are with countries that have relatively lower tariffs than India. As a result, they give advantages to these countries rather than to us,” Acma Executive Director Vinnie Mehta said.

“There are trade agreements with Japan, Singapore, Malaysia and South Korea. The government should look at FTAs with nations that have relatively higher tariffs than India, so that we get better market access opportunity,” he added.

Moreover, there are instances where components attract nil duty, though there have been tariffs on the raw materials. “For example, our agreement with Thailand is called Preferential Trade Agreement. Certain aluminium components can be imported with nil duty, but if Indian manufacturers want to import aluminium to manufacture the same product, they have to pay duty. It is affecting the manufacturing units,” Mehta said.