This could become the second instance, after the
eviction of GMR Infrastructure from Maldives, where Indian companies suffer
high handedness of India’s tiny neighbours with the government remaining a
silent spectator.
Last month, Sri Lanka suddenly increased duties on
SUV’s and commercial vehicles after more than doubling them for cars earlier in
the year. If the island nation remains unchecked, this could spell the death of
Indian automobile exports to Sri Lanka.
Not only were duties increased exorbitantly for Indian
imports, the Sri Lankan government has apparently simultaneously reduced duties
for vehicles coming from other Asian markets such as Japan.
Not only were duties increased exorbitantly for Indian
imports, the Sri Lankan government has apparently simultaneously reduced duties
for vehicles coming from other Asian markets such as Japan. Reuters
Unable to take the duty blow, exports of cars from
India have already reduced by 90 percent where those of two-wheelers are down
60-70 percent. Sri Lanka is one of the largest export markets for Indian cars,
two-wheelers, trucks and buses.
One in eight vehicles manufactured in India and
exported found their way to this market last fiscal, with Sri Lankan exports
netting $800 million to Indian automobile manufacturers.
A senior official of the Society of Indian Automobile
Manufacturers (SIAM) said today that Sri Lanka has doubled duties on almost all
vehicles categories.
A story in Sri Lankan daily The Sunday Times
speaks of prohibitive duties edging out Indian vehicles “while exemptions to
those coming from Japan will give them an added advantage in the market”.
This story also speaks of the Sri Lankan government
clearing a Chinese investor’s application to set up a car assembly operation at
two locations in the country for $20 million.
The SIAM official quoted above said if these reports
are true, this could prove to be a double whammy for Indian automobile industry
since as per an earlier SAFTA agreement (South Asian Free Trade Agreement)
India has provided zero-duty access to products from SAFTA countries (including
Sri Lanka) but does not enjoy the same privilege in these countries.
“This effectively means the Chinese company setting up
a plant in Sri Lanka can export automobiles to India at zero import duty. If
that happens, we will be hit from all sides,” said this SIAM official.
The Sunday Times story quoted
an anonymous customs official saying “a technicality placed imports of cars
from Japan at an advantage. While 80 percent of the cars imported into Sri
Lanka are from India and under 1000cc engine capacity, no such vehicles are
brought from Japan”.
Another story in Sri Lankan newspaper Business
Times points out that the government there has “controversially reduced
duties on racing cars while increase excise duty on small cars with engine
capacity of less than 1000cc.
The Sunday Times story also
quoted a car importer as saying the Maruti Alto would become more expensive by
at least Rs 250,000 after the excise increases.
Other importers said the price of Indian trucks would
increase by more than Rs 10 lakh. Till end-October, more than 5,000 cars were
lying with dealers in Sri Lanka, waiting to be re-exported back to India
because of exorbitant duties. The SIAM official said his association was in
dialogue with the commerce ministry to sort out this excise issue.
But just like in the case of Maldives seizing their
airport from GMR’s control, perhaps in this case too India may finally remain a
silent spectator.
