The India Government is contemplating various options, including diplomatic, to deal with the situation created by the Sri Lankan Government's decision to impose new import duty on automotive exports from India.

Rajeev Kher, additional secretary in the Commerce Ministry, said Sri Lanka is an important market for Indian Automobile sector, and the very substantial increase in import duty on exports from India would adversely affect Indian exporters.

Mr. Kher added that cutting down of the import tariff would be win-win situation for both India and Sri Lanka.

On the sidelines of a FICCI event, Kher told reporters, "India is mulling various options to deal with the situation. One of the options is to approach purely diplomatically, and request the Sri Lankan Government because it is a win-win situation if they cut down the tariff."

The Sri Lankan Government recently hiked import duty on automobile exporters from India by nearly 100 per cent.

As far as personal cars and commercial vehicles are concerned, Sri Lanka is one of the most important markets for the Indian automobile manufacturing sector. In 2012, India exported vehicles worth more than $800 million to the island nation.