The demand of the EU to reduce import duties on fully imported vehicles will not only impact employment in the sector but will also be unfair to automobile makers from Japan, Korea and the US which have made huge investments in India, industry insiders said.
When contacted, Society of Indian Automobile Manufacturers (SIAM) Deputy Director General Sugato Sen said: "We have been consistently talking about keeping 20 tariff lines out of all FTAs and the government of India has so far supported this position. SIAM hopes that the position will be maintained in the case of India-EU FTA too."
The 20 items concerning auto sector that are in the negative list of FTAs include 16 different types of vehicles, including two-wheeler, and four different types of engines.
According to auto industry experts, giving in to the demand of EU in the auto sector could result in lower inflow of foreign investments in the key manufacturing sector.
"One of the main reasons for having a high import tariff on imported vehicles is to encourage companies to manufacture in India and is not about protecting the domestic industry. Once that is reduced, why would they set up manufacturing base in India?" asked an industry insider, who requested anonymity.
"This will thus run contrary to the 'Make in India' initiative," he said.
Therefore, any such concession to the EU could have direct impact on the auto industry that accounts for 7 percent of India's GDP and employs about 19 million people, both directly and indirectly, he added.
The India-EU FTA has been hanging fire for a long time with the last summit held in May 2013. The two sides have been unable to reach an agreement. However, there have been reports of late to revive the talks for the Free Trade Agreement between the two.
While the EU wants India to drastically lower customs duties on automobiles that ranges from around 80 percent in small cars to 130 percent in luxury vehicles along with similar steps in components, wines and spirits.
India on the other hand has been pressing for granting of 'data secure nation' status by the EU as it will have a bearing on its IT companies wanting market access there, apart from a liberalised visa regime for its professionals and greater market access in services and the pharma sector, among others.