India may spurn EU demand for duty cut on auto, parts .

NEW DELHI: India may reject demands by the European Union that the government slash import tariffs on industrial goods such as automobiles and auto components, making it unlikely that the two sides will finalise their long-awaited free trade agreement (FTA) anytime soon.

The trade and economic relations committee, or TERC, chaired by Prime Minister Manmohan Singh has decided that no new concessions should be offered under the proposed trade deal, something domestic manufacturers have been lobbying for.

New Delhi's tough stance spells more trouble for the much-delayed trade deal and dashes expectations that European automobiles, and wines and spirits would become cheaper for Indian consumers under such an accord.

The EU had sought concessions in 56 non-agriculture market access tariff lines, said an official aware of the stand of the TERC, the highest decision-making body on trade deals. "The TERC has decided that it would be difficult to accommodate most of these in view of the implications this has for our domestic manufacturing industry," the official said.

The 27-nation bloc wants duty on the auto sector to decline eventually to zero from the current 60-100%. However, India has resisted this due to the impact such a steep tariff reduction will have on local manufacturers.

The TERC also decided that "a final effort may be made by the department of commerce to push for a settlement of all issues based on existing offers and demands," the official said.

The panel also mandated secretaries at the ministries of finance, commerce, industrial policy and promotion and external affairs to examine the advantages and disadvantages of an FTA with the EU, the official said. This panel, along with the Planning Commission and the chairman of the Prime minister's Economic Advisory Council, will prepare an agenda for action by the government to boost India's global competitiveness.

India and the EU have been negotiating the broad-based investment and trade agreement (BITA) since 2007 and have held 15 rounds of negotiations in the last six years. The ministerial-level talks scheduled in June did not take place.

The EU has already made it clear that there can be no deal without India slashing tariffs on cars and allowing a higher foreign direct investment limit in insurance. The United Progressive Alliance is committed to raising the FDI limit in insurance to 49% from 26% but the move needs parliamentary approval.

The panel has, meanwhile, directed the department of commerce to take a "calibrated approach to FTAs", said the official cited above, suggesting that the government wants to ensure that such accords don't hurt local industry.

European Commission vice-president Joaquin Almunia had blamed India for the delay in finalising the trade pact during his visit to New Delhi last week. He had said that the ball was now in India's court. Commerce and industry minister Anand Sharma had demanded data secure status for India in his meeting with Almunia, something the EU is reluctant to give. This relates to information about customers and other entities remaining safe from theft.

The EU, for its part, wants restrictions on the movement of professionals based on sectors, which could adversely impact India's IT sector.

India has signed FTAs with about 20 countries including Japan, South Korea, the Association of South-east Asian Nations ( Asean), Sri Lanka and Nepal. It's negotiating market opening pacts with Australia, Canada and New Zealand, apart from the European Union.

Source : economictimes.indiatimes.com