The Hindu Business Line : Thai FTA: Will it benefit the auto parts industry?

EVEN as the nitty-gritties of the Free Trade Agreement (FTA) with Thailand are yet to be released, analysts are of the view that the agreement could be a mixed bag for the domestic automotive industry.

While, the domestic auto components industry has said that in the absence of a proper level playing field, the FTA would negatively impact the growth of the industry, analysts are saying that the Indian automobile industry can successfully use Thailand for tapping the entire Asean region.

"The FTA should be viewed in a different and broader context. As Thailand is part of the Asean, setting up a base in Thailand would allow Indian auto companies to sell to the rest of the Asean countries at only 5 per cent duty. Further, the Asean is also set to sign a FTA with China in the future," Mr N. Srinivasan, Deputy Director-General, Confederation of Indian Industry (CII), said.

Meanwhile, past experience (with companies such as Indo Rama and Aditya Birla group) has shown that it is cost effective to produce in Thailand, despite labour being more expensive. "The cost of transaction comes down; there is better infrastructure, logistics and quicker movement of goods," points out an industry official.

"When seen in a broader perspective, the FTA would enable enterprises to become more cost efficient in their business and operations," Mr Deepak Kumar Singhania, Managing Director, LML Ltd, said.

However, the major issue to be addressed is the anomaly the auto components industry is facing.

"We are not against the FTA. We are only asking for a level playing field. The concern for the industry is that the duty on inputs is high - on steel and other raw materials - when compared with the Thai auto components industry, making India susceptible to cheaper auto parts imports from Thailand. This is the issue the Government has to address," an official from an auto components manufacturing firm said.

Indian auto components firms have successfully managed to cut down manufacturing costs in recent years apart from improving upon quality. "At the same time, many firms are already OEM suppliers to global automobile manufacturers. Thereby, the industry should not feel threatened by the FTA. While there is concern that MNCs, particularly the Japanese ones, may actively begin sourcing engines and components from Thailand, one should not forget that many such firms are also setting up export bases in India," points out an industry analyst.

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