New Delhi: At a time when India and the EU are struggling to negotiate duty cuts on automobiles, New Delhi will drastically reduce tariffs on diesel engines and gear boxes from Japan under their free trade pact.

The Comprehensive Economic Partnership Agreement (CEPA) between India and Japan will come into force from Monday.

While India will reduce duty on diesel engines to 5 per cent from 12.5 per cent in the next six years, it will cut tariffs on gear boxes to 6.25 per cent from 12.5 per cent in the next eight years.

In addition, the country will eliminate duties on car mufflers, which currently stand to 10 per cent, in the next 10 years.

Under the CEPA, which was signed in February, the two major Asian economies will eliminate import duties on 94 per cent of their trade items in 10 years.

The agreement covers goods, services like telecom and finance, movement of professionals, customs procedures and cooperation in other areas.

The agreement will give a boost to bilateral trade between Indian and Japan, which may touch USD 25 billion by 2015 from USD 12.35 billion at present.

India and the 27-nation European Union (EU) have been negotiating hard over a similar pact since June, 2007, which is likely to be concluded by the end of 2011.

While India is seeking greater access to the services sector in the EU, as a quid pro quo, EU wants India to open up the auto sector by lowering import duty on imported cars and components, among other things.

However, the Indian auto industry has cautioned that if such a concession was granted, future investments in the sector in the country will be hit.

(Agencies)