The agreement to establish a free trade area with Thailand led to a new item being added to the agenda for the meeting of a delegation from the Automobile Components Manufacturers Association with Steel Secretary V K Duggal earlier in the week.

It said India needed to reduce its import duty on steel if the automobile component industry was to survive the Thai onslaught once free trade started between the two countries in 2006.

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"Several of the Thai automobile component companies have access to duty-free import of steel. We are quite cost competitive, but this gives them an unfair advantage," said Surinder Kapoor, chairman of the Sona group, a leading producer of automobile components.

The alarm runs through not just automobile component companies -- Indian makers of consumer electronics like air-conditioners, refrigerators, fans, printed circuits and cathode-ray picture tubes are complaining that there could be a loss of business once the FTA agreement comes into force.

These industries are concerned about the high import duties of 25 per cent on key inputs like steel, plastics and copper.

Suresh Khanna, secretary general of the Consumer Electronics an Television Manufactures Association, said, "Inputs like colour picture tubes, plastics, aluminium, copper and lead attract high duties, which need to be brought down to make domestic manufactures more competitive than their Thai counterparts."

Others in the industry, too, have raised the demand for a lowering of taxes after the FTA was announced.

"While the excise duty on refrigerators is low, on air-conditioners it is 24 per cent. This has to be brought down for the local players to be competitive," said KJ Jawa, vice-president (operations) of Voltas Ltd.

Added Salil Kapoor, head of the air-conditioner division of LG Electronics, "For Indian manufacturing to be competitive, excise duties, sales tax, and import duties need to be brought down."

On its part, the government said that as a safeguard, the agreement would have clauses to restrict import of products whenever there is a surge and the domestic industry is affected.

"If any product, which is covered under the Early Harvest Scheme (a list of 84 items in which free trade will be opened on March 1, 2006), is imported into the territory in such a manner or in such quantities as to cause or threaten to cause, serious injury to the domestic party may, after prior consultations, to be concluded within 90 days or on any mutually agreed timeframe, from the date of notifying the other party, suspend provisionally without discrimination the preferential treatment so accorded," the framework agreement signed last week said.

Commerce ministry officials pointed out that the framework agreement has inserted provisions for interim rules of origin for all products covered under the Early Harvest Scheme to protect third party exports to be routed through India or Thailand for re-export to the two markets. A sub-group of experts is to be constituted to finalise the rules of origin.

Looking East-II

• The losers from the FTA deal with Thailand
• Automobile components sector
• AC makers
• Refrigerator makers
• Fan companies