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India eyes duty concessions on EVs through bilateral FTAs, ruling out Across-the-Board cuts
Industry News- Dec 19,23
The preference for FTAs arises from the challenge of implementing a uniform duty cut for all companies, making bilateral agreements more viable.
India is reportedly leaning towards offering duty concessions on electric vehicles (EVs) through Free Trade Agreements (FTAs) with specific countries, as opposed to a blanket reduction in import duties. The decision to rule out a general reduction in import duties on EVs is expected to impact Tesla Inc's entry into the Indian market. The Junior Minister in the Ministry of Commerce and Industry, Som Parkash, informed Parliament on December 14 that there is currently no proposal to exempt local value addition costs or provide subsidies on the import duty for EVs in India.
The preference for FTAs arises from the challenge of implementing a uniform duty cut for all companies, making bilateral agreements more viable. The individual familiar with the matter explained that if India strikes an FTA with a particular nation, lower levies on EVs from that country can be considered, as permitted by the World Trade Organisation (WTO).
While WTO norms typically require trade barrier reductions to be applied on a most-favoured-nation basis, bilateral trade deals between two nations or regions can be exempt from this rule, allowing trade benefits to be specific to the involved parties. India, a WTO member since January 1, 1995, is currently engaged in discussions with the UK and the European Union for potential bilateral FTAs.
In negotiations with the UK, the Indian government is contemplating tariff rate quotas to accommodate the UK's request for reduced import duties on EVs as part of the proposed trade deal. Although earlier reports suggested a new EV policy in the works to cut import levies for companies committed to local manufacturing, the cited source emphasised the need to balance domestic and foreign entities, particularly given India's Production-Linked Incentive (PLI) scheme for EVs.
The Indian government has already demonstrated its commitment to EV adoption by implementing measures such as the PLI scheme for the automobile and auto component industry, with a substantial budgetary allocation to incentivise domestic manufacturing of advanced automotive technologies, including EVs. Additionally, the goods and services tax on EVs has been reduced from 12% to 5%, reflecting the government's efforts to promote the electric mobility sector.
Source: India Shipping News
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