India Offers Duty Concessions to UK for Large Petrol and Diesel Vehicles Under CETA Agreement

India has agreed to reduce duties on large petrol and diesel vehicles and high-priced electric vehicles (EVs) from the UK. This move is part of a trade agreement aimed at safeguarding India's domestic automotive industry, particularly in the mid and small car segments, as well as low-priced EVs. An official confirmed that no concessions will be made for electric, hybrid, and hydrogen-powered vehicles during the first five years of the agreement.

The Comprehensive Economic and Trade Agreement (CETA) was signed in London with Prime Minister Narendra Modi and British Prime Minister Keir Starmer present. The agreement will see tariffs on automotive imports decrease from approximately 110% to 10% under specific quotas for both countries. The focus of these concessions is on vehicles with large engine capacities, specifically those above 3,000 cc for petrol and 2,500 cc for diesel engines.

Trade Agreement Details

The duty reduction to 10% will be implemented over five years within the quota limits. For vehicles outside the quota, a 50% duty reduction will occur over ten years. This framework aims to provide market access to UK exporters primarily for large engine internal combustion engine (ICE) vehicles and high-priced EVs while protecting India's sensitive automotive segments.

Under the agreement's terms, the number of ICE vehicles allowed will decrease as more EVs receive concessions starting in the sixth year. This adjustment ensures that the total quota volume remains at 37,000 units by the end of 15 years of duty concession. No market access is granted for vehicles priced below £40,000 CIF, ensuring protection for India's mass-market EV segment.

Market Access Strategy

India has secured market access equivalent to four times its concessions given to the UK on EVs in the UK market. The government official stated that India has offered a structured and balanced market access proposal to the UK in the automobile sector under this trade agreement.

This offer focuses solely on Completely Built Units (CBUs) of passenger vehicles, including ICE vehicles as well as electric, hybrid, and hydrogen-powered vehicles. India's commitment involves a phased and development-oriented quota-based liberalisation strategy.

The agreement ensures that India retains sufficient time to grow and innovate within its strengths in small (up to 1,500 cc) and mid-segment (1,500–3,000 cc petrol / up to 2,500 cc diesel) vehicle categories. The official emphasised that this approach allows India to enhance its global competitiveness in these areas.

With inputs from PTI