The spokesman said the 15-nation EU had asked for formal consultations with India, the first step in WTO's dispute-settlement procedure. The EU objects to India's policy of prohibiting imports of certain vehicle products by companies which do not meet minimum export and local content criteria.

The EU maintains that the measures break WTO rules, and distort international trade by giving companies which benefit from them an unfair advantage over their European competitors, spokesman for the commission, the EU's executive body, said.

The Indian government grants local joint-venture companies special licences to import automotive components and finished vehicles provided they use a minimum proportion of Indian components and that their exports of vehicle products balance out their imports, according to thecommission.

Following an agreement negotiated with the EU under the WTO, India is committed to phasing out its import restrictions on cars by March 31, 2002, the commission said. However, it said India's rules on the import of components went beyond the terms of the agreement and broke international trade rules.

The commission said it hoped to find an amicable solution to the dispute which conformed to WTO rules.

Under the procedures of the Geneva-based world trade body, if no solution is reached in consultations, the complaining party can ask for a disputes panel to investigate the case.

The commission said its action, which it said was widely supported by EU governments and industry, was part of its campaign against what it saw as discriminatory automotive rule around the world.

It said the EU had launched formal wto dispute settlement proceedings in three other cases involving automotive policies in Indonesia, Brazil and Canada.

It said these countries' rules shared some common features andimposed conditions on companies investing locally in exchange for what it considered discriminatory trade privileges.

A spokesman for India's diplomatic mission in Brussels could not immediately be reached for comment.

The EU launched the WTO case a day after EU ministers delighted Indian officials by rejecting a European Commission proposal for anti-dumping duties on imports of unbleached cotton grey fabric from five countries, including India.