Carmakers want trade pacts with Australia, South American nations to boost auto exports

To boost vehicle exports to those countries & offset recent losses due to falling export to African nations

Automobile makers want the government to ink free trade agreements (FTA) with Australia and South American nations to boost vehicle exports to those countries and offset recent losses due to falling export to African nations.

The long slump in commodity prices globally have heavily hit countries majorly dependent on minerals like gold and metals. Oil rich African countries such as Nigeria, Algeria and Egypt, which are also major importers of Indian vehicles have been hit by an acute shortage of US dollars - the currency used globally for trade.

Industry body Society of Indian Automobile Manufacturers (SIAM), who had recently met Commerce ministry officials want the government to institute a rupee based payment mechanism with such nations.

However, they have also stressed the need for finding newer markets in Australia and South America, for which it has requested the commerce ministry to move fast on FTA discussions with these nations.

“We need to enter unexplored markets such as South America and Australia and having trade pacts will provide as a backup to deal with competition” Deputy Director General of SIAM, Sugato Sen told Business Standard.

While India recently expanded the Preferential Trade Agreement (PTA) with South American nation Chile, it is negotiating an FTA with Australia.

Automobile manufacturers are targeting the Australian market since most Australian companies are in a bad shape and the country is expected to import heavily in the future, a Commerce ministry official said. He added that the ministry has received same complains from exporters regarding trade with Angola, Ghana and Ethiopia.

India is a major exporter to countries such as Nigeria, Algeria and Botswana. According to SIAM, of the total automobile exports of around $8.86 billion in FY16, Africa alone accounted for 30-35% of the total overseas shipments in value terms.

However, growth in total auto exports to the continent has slowed down to 1.9% in the last financial year.

Sen said a number of non tariff barrier issues faced by exporters earlier have their roots in the current crisis. He added that having a rupee trade mechanism will work in favor of India since it has a negative trade balance with most vehicle importing nations.

Media reports on Friday suggested the External Affairs Ministry is discussing the possibility of opening an escrow account with Nigeria and other countries, where the exporter will have first charge on oil dues that are paid to the African country.