The domestic tyre industry has sought a review of the country’s regional trade agreements which are adversely impacting it.

In a pre-Budget memorandum to the Finance Ministry, the industry said tyres in large volumes were entering India, while import of raw materials was restricted as a direct outcome of these agreements.

The basic customs duty on tyres is 10 per cent. However, under various trade agreements, the duty on tyres ranges between nil to 8.6 per cent, facilitating tyre imports into India.

While tyres (finished product) can be imported into India at preferential/ concessional duty under various trade agreements, rubber (basic raw material) falls in the negative list (no duty concession) across most trade agreements, thus impacting the tyre industry both ways, said the Automotive Tyre Manufacturers’ Association.

Under the ASEAN FTA, Indo-Sri Lanka, India-Singapore or India-Malaysia trade agreements, rubber is in the negative list with no duty concession.  On the other hand, under the Indo-Sri Lanka and India-Singapore agreements tyre imports do not attract any duty. Tyres can be imported at 6 per cent duty under the ASEAN FTA and at 8.6 per cent duty under the Asia Pacific Trade Agreement.

Low import tariffs in India have encouraged large and growing volumes of tyre imports, despite more than adequate domestic manufacturing capacity and substantial investments. Hence, the Government can increase the customs duty on tyres from the existing 10 per cent without contravening WTO provisions as there is no bound rate on tyres, said Raghupati Singhania, Vice-Chairman, ATMA.

According to ATMA, in line with the capacity creation in the auto sector, the tyre sector has also added/ expanded capacity pan-India. The industry is therefore looking to the new Government for scrapping the inverted duty structure and tweaking the terms of trade agreements so as to make the industry competitive. Such policy enablers are imperative if manufacturing has to be bolstered and employment opportunities enhanced.

ATMA has also asked for reduction of import duties on raw materials where domestic supply is deficient and complete waiver of duties on raw materials which have no domestic production.

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