This Article is From Sep 12, 2014

Cannot Protect Domestic Auto Industry Forever: Commerce Secretary

New Delhi: In a veiled warning to the domestic auto sector, the Commerce Ministry on Friday said it cannot continue to provide protection to the industry while duty barriers are coming down all over the world.

"...we have to look at to what extent the present tariff protection to the auto sector is sustainable... We will have to question ourselves on the sustainability of a long-term tariff protection plan particularly in an environment where every country is bringing down tariffs," Commerce Secretary Rajeev Kher said in Delhi.

He was speaking at the Society of Indian Automobile Manufacturers' (SIAM) annual convention.

India is protecting the domestic auto industry from overseas competition while signing free trade agreements with different nations and groups.

Mr Kher said that while negotiating trade agreements, one has to keep in mind the overall interest of different sectors.

"We have consciously over the last several years by creating a tariff protection have nurtured the industry and I think the point has come when the automotive plan needs to look at to what extent we want to continue with that and how do we want to bring it down to some kind of global at par," he said.

The negotiations for a free trade agreement between India and the 27-nation European Union got stuck mainly because of duty reduction in the auto sector. EU demanded significant duty cut in the sector.

"When we look for a preferential trade relation, we clearly can't have a win-win all in our not look for a relationship in a trade agreement where it will be one way flow," Mr Kher said.

However, he assured the industry that the ministry would announce incentives to boost exports.

"In the foreign trade policy (FTP), the auto sector will receive export incentives. The assurance I want to give you is that the sector will remain a beneficiary of the incentive programme under the FTP," he said.

The FTP is expected to be announced early next month.

Mr Kher also asked the industry to explore new markets such as Latin America, Africa and West Asia.

He said the government was in discussion with two regional blocs - Economic Community of West African States (ECOWAS) and Common Market For Eastern and Southern Africa (COMESA) - for preferential trade agreements.

"In CIS, we believe Russia can be a good market not just for auto but also for other products. Russia is a part of the Eurasian Customs Union. We are in advance stage of consideration on the possibilities of a trade agreement with the customs union," he said.

He, however, said the internal ecosystem of Mercosur - a trading bloc in Latin America comprising Brazil, Argentina, Uruguay and Paraguay - is not conducive to negotiate a trade  agreement, adding, "Therefore we are looking for opportunities for institutionalising a preferential relations with some of the other forward countries and we are hoping that we will be able to walk forward."

He further said that Indian Missions abroad play an important role in boosting trade.

"We are educating them about countries' sectoral export incentives and this is the process which is going on. Hopefully in the next three months, we would have educated in the sense of telling every relevant mission about significant trade interest the country has in specific sectors," he added.