25% cheap imports of Chinese bicycles & components bleeding domestic industry: Study

Reduce VAT on bicycle parts & interest rate on SME loans; Keep stable power tariff: ASSOCHAM plea to Punjab Government

Ludhiana, March 13, 2014: Rising cheap exports of bicycles and their components from China to India at almost 25 per cent cost-comparative advantage owing to free trade agreements (FTAs) together with South Asia Free Trade Agreement (SAFTA) are posing a serious threat to domestic bicycle industry producing over 41,000 bicycles per day, according to a just concluded study undertaken by the ASSOCHAM Economic Research Bureau.

 “There is a need to increase the import duty on bicycles and its parts from prevailing 20 per cent to 30 per cent as by doing this the prices of bicycles made both in India and China would equate in the global market,” noted a just-concluded study on ‘Future of Indian Bicycle Industry,’ conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

 “There is an urgent need to impose strict anti-dumping laws to check rising cheap imports of bicycles and components from China which has been dumping its products into India,” said Mr D.S. Rawat, secretary general of ASSOCHAM while releasing the findings of the study.

“The imports of bicycles and their components from China to India have risen by about 41 per cent during the course of past five years, as such it is imperative for India to review the FTAs and SAFTA to safeguard the interests of the domestic bicycle industry,” said Rawat.

India’s exports of bicycle to other countries have grown at a compounded annual growth rate (CAGR) of about 17 per cent while the imports grew at over double the rate of about 35 per cent mainly on account of uncompetitive pricing, noted the ASSOCHAM study. “China has ranked on top amid countries importing bicycles and their components into India with imports worth about $8,900 in 2007 to $35,000 in 2012.”

“Soaring fuel prices, rising rural incomes, growing health consciousness together with free distribution of bicycles to students by various state governments in order to promote education and keep a check on dropout rates will push the growth of bicycle industry in India and the industry is expected to generate about one million jobs during the course of next couple of years or so,” highlighted the ASSOCHAM study.

However, input cost inflation like rising steel prices (largely due to rising exports of iron ore pellets), poor condition of roads especially in rural areas are other significant challenges faced by the industry, it added.

India is world’s second largest bicycle producer after China accounting for about 10 per cent of global bicycle production and with an estimated market size worth $1.5 billion Indian bicycle industry produces about 15 million finished bicycles annually 

 ASSOCHAM has batted for reduction in excise duty imposed on bicycles to support the industry and reduce the excess burden.

 On behalf of the bicycle manufacturers, the apex chamber has urged the government of Punjab to reduce the value added tax (VAT) on bicycle components which is currently hovering 5.5 per cent. “There is also the need to release VAT refund of bicycle manufacturers lying with the Excise and Taxation Department of Punjab government so that the money be utilised by manufacturers to push production.”

 In its study, ASSOCHAM has also suggested the Punjab government for keeping stable power tariff as the same is being raised quite frequently thereby adding to the cost of production of bicycles.

 Bicycle manufacturers in Ludhiana, the city accounting for lion’s share of about 90 per cent of bicycle production in India have urged the government to reduce both the interest rates on loans which at 11.75 per cent for small and medium enterprises (SMEs) is too high to bear.

Besides, there is also the need to reduce the freight charged by the government on raw materials being imported from other states which further escalates the production costs of bicycles, further noted the ASSOCHAM study while highlighting the various problems being faced by the sector.