Dec 10th, 2012 @ 01:42 pm › Akhbar Navees
Why has Lanka imposed high duties on cars from India?
The alternate headline and the answer to the question
is simpleHigh Duty on ‘Indian’ cars, enables Lankan car exports to India.
In another instance of a commercial incompetence,
Bharati companies are making a big hue and cry. The reason for the high duties
on cars “from” India (not Indian cars) is simple. Instead of being straddled
with shoddy versions of Japanese cars, (assembled in India under a local logo),
Lanka wants to set up its own car assembly business, so that it can assemble
its own cars (under its own logo –something like “Sinhila”) and then export
them to India and other countries.
“Maruti” is a Japanese car called Isuzu marketed in
Bharat under the Bharati name. “Maruti” has had a troubled history. Sanjay
Gandhi (so of Indira Gandhi) was a wayward youth who committed untold
atrocities on Indians under the brutal rule of Indira Gandhi’s emergency. He
was supposed to have designed and built an indigenous car for Bharat. Like most
projects in India (and South Asia), corruption took its toll and the car was
never built. Finally, they imported the Suzuki kits and slapped a “Maruti” logo
on the car. All the guts, the engines, and electronics are Suzuki.
Why should Lanka allow itself to be the dumping ground
for cheap imitations of, and stripped down versions of Japanese cars. Lanka is
the largest export market for cars assembled in India.
Trying to egg on the Bharati government, and making it
a flag issue, the Indian press reports are saying “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.”
Tata has been sucking the Bharati consumers for
decades. It marketed its cars as indiginous –but were actually assembled from
kits.
After a lot of strategic thought, Lanka increased
duties on SUV’s and commercial vehicles from Bharat. To build its own industry,
it had doubled the duties on cars earlier in the year. The Bharat press is
being sensational again with headlines screaming that “If the island nation
remains unchecked, this could spell the death of Indian automobile exports to
Sri Lanka.”
The Bharati press is being dramatic –. It is rasing
the red herring that Lanka “reduced duties for vehicles coming from other Asian
markets such as Japan.” The reduction on duties are not on general imports of
cars from Japan, but on specialty vehicles.
Exports of cars from India have already reduced by 90%
and motor-bike exports are down 60%-70%. Due to bad policies of the past Lanka
is “one of the largest export markets for Indian cars, two-wheelers, trucks and
buses.” Tata has been dumping its shoddy products on third world countries for
a decade.
12.5% of Bharati auto exports $800 million are dumped
on Lanka. Colombo wants to reduce its import bill and provide employment to its
own people.
==============
A story in the Lankan press gives us the deep insight and reason for the prohibitive duties on Bharati products.
A story in the Lankan press gives us the deep insight and reason for the prohibitive duties on Bharati products.
The Lankan government has been able to attract Chinese
investors to set up a car assembly operation at two locations in the country
for $20 million.
There is hue and cry in the Bharati press. This would
allow Lanka to export cars to Bharat (SAFTA rules allow this).
“This effectively means the Chinese company setting up
a plant in Sri Lanka can export automobiles to India at zero import duty. SIAM.
The Bharati press is sensationalizing this. It would
take local Lankan assembly plants a long time to fulfill the needs of Lanka.
Exporting to other countries would take a whil –though this is a possibility
for the futre and a healthy one for Lanka.
As the new duties kick in the Maruti Alto would become
more expensive by at least Rs 250,000, the price of Indian trucks would
increase by more than Rs 10 lakh.
More than 5,000 cars were lying with dealers in Sri
Lanka, waiting to be re-exported back to India because of exorbitant duties.
As Bharati companies continue to play badly, they are
now facing competition from China. Either the Bharati companies become more
efficient or they will face eveiction notices in the vicinity, near-aboard, and
in other uptapped markets.
The days of forcing Lanka, Maldives and Bhutan to buy
shoddy products is over.
