India-UK Free Trade Pact: 3.78 Lakh UK Cars To Enter India At Concessional Duty

India will allow the import of 3.78 lakh conventional-engine passenger vehicles from the UK at concessional customs duty over the first 15 years of the India-UK Comprehensive Economic and Trade Agreement (CETA), according to the agreement document released on Wednesday. The trade pact will come into force on 15 July.

Tariffs Under The Agreement

Under the agreement, tariffs on automotive imports will fall from around 110% to 10%, subject to quota limits agreed by both countries. The quota covers multiple passenger vehicle categories, including mass-market models.

A total of 20,000 passenger cars will be allowed to enter India in the first year of the agreement. For passenger cars with engine capacity above 3,000 cc for petrol and above 2,500 cc for diesel vehicles, the first-year quota has been fixed at 10,000 units. Customs duty on these imports will decline to 30% from 110%.

For vehicles with engine sizes between 1,500 cc and 3,000 cc for petrol engines and up to 2,500 cc for diesel engines, the quota will be 5,000 units. Duty will fall to 50% from 66%. The same 5,000-unit quota applies to mass-market passenger vehicles with engine sizes up to 1,500 cc. Customs duty on these vehicles will also be reduced to 50% from 66%.

Import Limits Peak In Fifth Year

The quota for conventional-engine vehicle imports will reach its highest level in the fifth year (see table below):

Customs duty across these categories will eventually settle at 10%. From the 15th year onward, the total annual quota for conventional-engine passenger cars will remain fixed at 15,000 units, with customs duty continuing at 10%.

India Keeps Mass-Market EV Segment Protected

The agreement does not open India's market for electric vehicles priced below Great British Pound (GBP) 40,000 (CIF). The move protects the domestic mass-market electric vehicle segment, where companies such as Tata Motors Passenger Vehicles, Mahindra & Mahindra, and Maruti Suzuki have been expanding their presence.

India has also not offered any tariff concessions for electric, hybrid, or hydrogen-powered passenger cars during the first five years of the pact. From the sixth year, electric, hybrid and hydrogen passenger vehicles priced between GBP 40,000 CIF and GBP 80,000 CIF will attract 50% customs duty, with an import quota of 400 units.

Vehicles priced above GBP 80,000 CIF will face 40% duty, subject to an annual quota of 4,000 units. By the tenth year, customs duty for both categories will decline to 10%.

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Export Opportunity For Indian Automakers

The agreement also gives India access to the UK market for electric, hybrid, and hydrogen-powered passenger vehicles. Indian exports in the GBP 20,000-GBP 80,000 price band will become duty-free from the sixth year. The export quota will rise gradually and reach 88,000 units in the 15th year, after which it will continue at the same level.

The provision is expected to benefit Indian vehicle manufacturers, including Tata Motors Passenger Vehicles, Mahindra & Mahindra, and Maruti Suzuki. The agreement excludes zero-emission two-wheelers, buses, and trucks from any commitment on tariff reduction. India will not provide preferential customs duty concessions on these categories under the pact.

Sources:

The Hindu Businessline

India Today