India-EU Free Trade Agreement to reduce prices of CBUs
The free trade agreement to be signed between India and EU will not only bring a good news for the two governments but will also bring a smile on the faces of Indian car aficionados. The agreement is expected to get the final nod by both the countries in the month of April 2011. The FTA includes the removal of high import duties by both the governments on the import.
The import duties on the automotive products will also be reduced at great extent which will effectively bring down the prices of CBUs (completely built units) by remarkable 38%. At present the CBU import in India calls for a duty of 60% which ultimately after the addition of VAT brings a cost hike by 100%. Thus the prices of these CBU coming from Europe are simply increased to double the initial value.
The other segment which will be affected by this agreement is the CKD (Completely Knocked Down) vehicles as with this agreement the 10% import duty will be cancelled on components from Europe Those cars which are built in India with the components being imported will also get an advantage as the 10% import duty on components is also proposed to be demolished by the agreement. But the total reduction that will appear in the prices of these cars will amount to 9% only. However the Japanese auto industry is not happy for the reduction in duties thus the markets will not get the Volkswagen Beetle at a price tag of Rs. 13 lakhs anytime soon. As per the claim made by a European Commission report with this India-EU FTA. the Indian economy with this pact will cost a 4% of India’s automobile production which amounts to $1.3 billion or Rs 6,000 crore to move to Europe.
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