India has included adequate safeguards in the free trade agreement with the UK to protect its sensitive sectors and in the automobile segment, the import duty will be reduced over 10-15 years, a government official said on Thursday. The official also said that the duty concession on imports of petrol and diesel engine vehicles from the UK is limited to a pre-defined quota.
Similarly, the quota for imports of British electric vehicles (EVs) at a concessional rate of customs duty is limited only to a "few" thousand.
India and the UK on Tuesday sealed a landmark free trade agreement that will lower tariffs on 99 per cent of Indian exports and would make it easier for British firms to export whisky, cars and other products to India, besides boosting the overall trade basket. The aim is to double the two-way commerce by 2030 from the present USD 60 billion.
Tariffs on automotive imports will be reduced from over 100 per cent to 10 per cent under quotas on both sides, benefiting companies such as Tata-JLR.
"For cars, duty will be cut in a period of 10 to 15 years and the volume of imports will be very small...We have not allowed futuristic cars (EVs) or low-cost cars. So a lot of protection measures we have taken," the official said adding India's car industry is set to reach a record 50 lakh units and by the time duty will be reduced, it may reach one crore per year.
As the fourth-largest automobile producer globally, India possesses the scale and strategic depth to emerge as a global leader in the automotive value chain.
The access to the UK market for ICE (internal combustion engine) vehicles has the potential to boost the country's auto and auto components exports.
"No out-of-quota duty reduction for EVs. The sensitivity related to EVs has been taken care of. The out-of-quota duty on ICE vehicles will be reduced gradually over a longer period of time, thereby helping our industries absorb the incremental increase of imports from the UK," the official added.
The total electric passenger vehicle retail sales in India grew by 56.87 per cent in April this year to 12,233 units compared to 7,798 units in the same month last year, according to the latest data released by the Federation of Automotive Dealers Associations (FADA).
Tata Motors continued to lead the market with 4,436 units of electric PVs sold last month, although JSW MG Motor India and Mahindra & Mahindra (M&M) are catching up with 3,462 units and 2,979 units respectively, as per FADA data collated as on May 2 this year.
Further, the official said that the text of the FTA will take some more time to be ready for signing. Three months would be required for legal scrubbing (vetting by lawyers) of the text which will be done jointly.
After signing, the ratification process of the FTA would take another year in the UK's parliament and only after that the pact would be ready for implementation.
The double contribution convention agreement (or social security pact) will also come into effect from that day.
Apart from the phased reduction in duties to 10 per cent from 100 per cent and a quota on the number of vehicles that can be imported at concessional duty, there will be further differentiation in tariffs based on the price and engine capacity, the official added.
The official also said that the India-UK FTA would provide huge opportunities for the domestic services sector.
Of the total trade of USD 56.76 billion between the two countries in 2024, around 58 per cent is in services. India's goods exports to the UK in 2024 were USD 14.38 billion while services exports were USD 19.57 billion.
The goods imports from Britain were worth USD 9.32 billion dollars, while services imports were USD 13.45 billion. The official said that India is looking to increase exports to USD 60 billion to the UK in the next five years and "it may touch USD 80-90 billion in 10 years".
In the FTA the UK has offered broad commitment across 137 sub-sectors which includes areas like IT and IT enabled Services, financial services, professional services, other business services and education services.
It has also offered an assured regime for temporary entry and stay requirements for business visitors, intra-corporate transfers, contractual service providers and independent professionals.
There is no quota on visas in services, the official said.
Due to the Double Contribution Convention pact, the Indian service providers will save Rs 4,000 crore annually.
The convention exempts temporary Indian workers in the UK from social contribution for three years.
"This will decrease the cost of doing business in services and increase the competitiveness of Indian services suppliers," the official added.
At present, Indian workers and companies in the UK together contribute 20 per cent of workers' annual salary for which they are not eligible for any benefit. The benefit or pension is admissible only after making contribution for at least 10 years.
As the temporary period of stay typically does not exceed 3-4 years, it effectively leads to forfeiture of all social security contributions made (Rs 4,000 crore annually).
While India has opened up government procurement for the UK under the FTA, the UK has also agreed to take a binding commitment to provide non-discriminatory treatment to Indian suppliers under the UK Social Value regime. Further in the agri sector, Indian products such as fresh grapes processed food, preserved vegetables and fruits, and chilled vegetables and fruits will become more competitive in the UK market than products from other countries like Brazil, Thailand, the US, and China.
Similarly, the quota for imports of British electric vehicles (EVs) at a concessional rate of customs duty is limited only to a "few" thousand.
India and the UK on Tuesday sealed a landmark free trade agreement that will lower tariffs on 99 per cent of Indian exports and would make it easier for British firms to export whisky, cars and other products to India, besides boosting the overall trade basket. The aim is to double the two-way commerce by 2030 from the present USD 60 billion.
Tariffs on automotive imports will be reduced from over 100 per cent to 10 per cent under quotas on both sides, benefiting companies such as Tata-JLR.
"For cars, duty will be cut in a period of 10 to 15 years and the volume of imports will be very small...We have not allowed futuristic cars (EVs) or low-cost cars. So a lot of protection measures we have taken," the official said adding India's car industry is set to reach a record 50 lakh units and by the time duty will be reduced, it may reach one crore per year.
As the fourth-largest automobile producer globally, India possesses the scale and strategic depth to emerge as a global leader in the automotive value chain.
The access to the UK market for ICE (internal combustion engine) vehicles has the potential to boost the country's auto and auto components exports.
"No out-of-quota duty reduction for EVs. The sensitivity related to EVs has been taken care of. The out-of-quota duty on ICE vehicles will be reduced gradually over a longer period of time, thereby helping our industries absorb the incremental increase of imports from the UK," the official added.
The total electric passenger vehicle retail sales in India grew by 56.87 per cent in April this year to 12,233 units compared to 7,798 units in the same month last year, according to the latest data released by the Federation of Automotive Dealers Associations (FADA).
Tata Motors continued to lead the market with 4,436 units of electric PVs sold last month, although JSW MG Motor India and Mahindra & Mahindra (M&M) are catching up with 3,462 units and 2,979 units respectively, as per FADA data collated as on May 2 this year.
Further, the official said that the text of the FTA will take some more time to be ready for signing. Three months would be required for legal scrubbing (vetting by lawyers) of the text which will be done jointly.
After signing, the ratification process of the FTA would take another year in the UK's parliament and only after that the pact would be ready for implementation.
The double contribution convention agreement (or social security pact) will also come into effect from that day.
Apart from the phased reduction in duties to 10 per cent from 100 per cent and a quota on the number of vehicles that can be imported at concessional duty, there will be further differentiation in tariffs based on the price and engine capacity, the official added.
The official also said that the India-UK FTA would provide huge opportunities for the domestic services sector.
Of the total trade of USD 56.76 billion between the two countries in 2024, around 58 per cent is in services. India's goods exports to the UK in 2024 were USD 14.38 billion while services exports were USD 19.57 billion.
The goods imports from Britain were worth USD 9.32 billion dollars, while services imports were USD 13.45 billion. The official said that India is looking to increase exports to USD 60 billion to the UK in the next five years and "it may touch USD 80-90 billion in 10 years".
In the FTA the UK has offered broad commitment across 137 sub-sectors which includes areas like IT and IT enabled Services, financial services, professional services, other business services and education services.
It has also offered an assured regime for temporary entry and stay requirements for business visitors, intra-corporate transfers, contractual service providers and independent professionals.
There is no quota on visas in services, the official said.
Due to the Double Contribution Convention pact, the Indian service providers will save Rs 4,000 crore annually.
The convention exempts temporary Indian workers in the UK from social contribution for three years.
"This will decrease the cost of doing business in services and increase the competitiveness of Indian services suppliers," the official added.
At present, Indian workers and companies in the UK together contribute 20 per cent of workers' annual salary for which they are not eligible for any benefit. The benefit or pension is admissible only after making contribution for at least 10 years.
As the temporary period of stay typically does not exceed 3-4 years, it effectively leads to forfeiture of all social security contributions made (Rs 4,000 crore annually).
While India has opened up government procurement for the UK under the FTA, the UK has also agreed to take a binding commitment to provide non-discriminatory treatment to Indian suppliers under the UK Social Value regime. Further in the agri sector, Indian products such as fresh grapes processed food, preserved vegetables and fruits, and chilled vegetables and fruits will become more competitive in the UK market than products from other countries like Brazil, Thailand, the US, and China.
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