India-UK FTA: Quota for cars to be based on engine capacity, price

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The lower import tariffs of 10% on the auto sector agreed under the India-United Kingdom Free Trade Agreement will incorporate different bands for automobiles for the purposes of the quota, according to a senior government official.

“The quota will have different bands for ICE (internal combustion engine) and electric vehicles,” the official explained. “For ICE vehicles, the bands for the quota will be based on engine capacity. For electric vehicles, it will be on price.”

The official added that the import duties on automobiles would be lowered over a period of 10-15 years, and that the “futuristic cars” and “low-cost” cars would not be included in the agreement.

Another aspect of the agreement is that the two countries have agreed to share electronic certificates of origin, which would greatly ease business for Indian exports. 

“India will gain a competitive advantage over other producing countries in grapes, mangoes, and marine products, and will substantially put India at par with the market leaders in these markets,” the official further said.  

Further, another government official confirmed that “sensitive agricultural products” such as dairy, apples, oats, and edible oils were not a part of the agreement. He added that sensitive industrial products such as precious metals, smartphones, and optical fibres too were excluded from the deal.

On medical devices, the duty would only be reduced and not eliminated, and that too only from the sixth year of the deal. 

The second official also estimated that the Double Contribution Convention — another agreement finalised along with the FTA and to come into force simultaneously — would save temporary workers in the UK and their employers about Rs 4,000 crore every year.

“Indian workers and companies in the UK together contribute 20% of workers’ annual salary for social security,” the official explained. “However, the benefits from this begin only after the tenth year of contribution. So a worker who is there for only 3-4 years and their employer forgo their entire contribution. They lose about ₹4,000 crore annually.”