At a time when the Indian automobile industry is strongly opposing lowering of import duty in the proposed India-European Union Free Trade Agreement, Tata Group chairman Ratan Tata has favoured cutting tariff on vehicles and components coming from overseas.

In an interview to the market research firm JD Power, Tata said such high import duties are unrealistic and create an artificial barrier of protection for local companies.

He also said India does "not have an automobile industry" as "we have assemblers of foreign brands" and only Mahindra & Mahindra and Tata Motors actually develop and manufacture products in the country.

"I also think that the very high rates of import duty should be reduced. They're unrealistic and create an artificial barrier to protect the manufacturers in India," Tata said.

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Similarly, the import duty on components should dramatically come down so that manufacturers based in India can source components globally at affordable rates, he added.

The Indian automobile industry, primarily the homegrown makers, are strongly opposing lowering of import duty in implementing the India-EU FTA, saying that it will threaten the competitiveness of domestic firms.

Components players are also of the view that reduction of duties will lead to dumping of products in India.

At present, a fully built vehicle attracts a customs duty of 60 per cent, which finally comes out to be around 110 per cent after considering sales tax, VAT and other levies.

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For pre-assembled engines, transmissions and gearboxes, customs duty is fixed at 30 per cent. Other auto parts attract a customs duty of 10 per cent.

On the domestic industry, Tata said: "We really don't have an Indian automobile industry. We have assemblers of foreign brands, and most of them are here in one form or another."

"Only Mahindra and Tata Motors actually manufacture and develop vehicles in India. As a result, the auto industry in India today is, therefore, a hybrid of several assembled foreign vehicles and a relatively small range of indigenously developed products," Tata said.

He said to become a "truly Indian industry", it is necessary to set up engineering facilities here, and then design and produce vehicles specific for the country.

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"I would expect to see considerable growth in the industry by 2020. Hopefully, it would benefit Indian players, like Mahindra and Tata Motors, and help expand market share," he added.

To become an automotive hub by 2020, Tata said the component industry should be more sophisticated and global.

"Most importantly, by 2020, I would like to see a much more mature automotive industry in India in terms of the technology developed within the country," he added.

India is hopeful of signing the Free Trade Agreement with the European Union this year. The government is also proposing to sign similar agreements with Canada, New Zealand and Australia.