India will allow the import of up to 3.78 lakh conventional-engine passenger vehicles from the UK at concessional customs duties over the first 15 years of the India-UK Comprehensive Economic and Trade Agreement (CETA), set to take effect on July 15, according to the agreement document released on Wednesday.

Under the pact, import duties on automotive products will be reduced from around 110 per cent to 10 per cent within specified quotas. The agreement also grants Indian automakers duty-free access to the UK market for electric, hybrid and hydrogen passenger vehicles from the sixth year onwards.

The UK-bound export quota for Indian-made electric, hybrid and hydrogen passenger cars priced between GBP 20,000 and GBP 80,000 will gradually rise to 88,000 units by the 15th year and continue thereafter. The provision is expected to benefit domestic manufacturers such as Tata Motors Passenger Vehicles, Mahindra & Mahindra and Maruti Suzuki.

For UK vehicle imports into India, the quota for conventional-engine passenger cars will reach a peak of 37,000 units in the fifth year across specified categories, with customs duties eventually settling at 10 per cent. The duty rate will not be reduced further beyond that level.

In the first year, India will permit the import of 10,000 units of passenger cars with engine capacities above 3,000 cc for petrol vehicles and above 2,500 cc for diesel vehicles at a reduced customs duty of 30 per cent, down from 110 per cent.

For vehicles with engine capacities between 1,500 cc and 3,000 cc, the first-year quota has been fixed at 5,000 units, with duties reduced to 50 per cent from 66 per cent.

The agreement also allows imports of 5,000 units in the mass-market category of up to 1,500 cc engine capacity in the first year, with customs duty lowered to 50 per cent from 66 per cent.

Overall, India will permit imports of 20,000 passenger cars across the three categories in the first year of the pact.

By the fifth year, the quota for larger-engine vehicles will rise to 19,000 units, while the quota for mid-sized vehicles will increase to 9,000 units. Imports of cars with engine capacities up to 1,500 cc will also be capped at 9,000 units, all at a concessional duty rate of 10 per cent.

From the 15th year onwards, the total annual quota will remain fixed at 15,000 units across categories, with customs duties maintained at 10 per cent.

India has excluded electric vehicles priced below GBP 40,000 (CIF) from the agreement, shielding the domestic mass-market EV segment where local manufacturers are seeking to expand their presence.

No duty concessions have been granted for electric, hybrid or hydrogen passenger vehicles during the first five years. From the sixth year, however, vehicles priced between GBP 40,000 and GBP 80,000 (CIF) will attract a 50 per cent duty under a quota of 400 units, while those priced above GBP 80,000 (CIF) will face a 40 per cent duty with a quota of 4,000 units.

The customs duty on both categories of electric, hybrid and hydrogen passenger cars will decline to 10 per cent by the tenth year.

The agreement also clarifies that zero-emission two-wheelers, buses and trucks, including electric and hydrogen fuel vehicles, remain outside the scope of tariff reduction commitments. India will continue to levy existing customs duties on these categories without extending preferential treatment under the pact.