OPINION: Punjab’s cycle industry declining rapidly

Punjab’s industry is facing acute problem and finding it difficult to survive.  Cycle industry is one of the pillars of Punjab’s economy and it is declining rapidly.  It is poor man’s vehicle and the escalating cost of bicycle is beyond the reach of the poor.  Cycle industry at the moment is surviving mainly due to largesse of state governments who are distributing free cycles to the poor.   The fiscal position of the State government is worrisome and this trend may not last.

Cycle industry is worth 1.2 billion dollar with annual production at 15 million units.  Although, there are four major producers of bicycle but over 90% of the production of components is in Punjab mainly in Ludhiana.  China is another populous country and its cycle industry is worth 8 million dollars producing 84.5 million units.  India has the density of 90 bicycles for every 1000 people whereas China has 149 units per 1000 people.  China is also far ahead in export of bicycles by exporting 50.7 million units annually compared with our 1.8 million units.

Bicycle manufacturing is highly labour intensive.  The macro problem of inflation is eroding the buying capacity of poor man. On the other hand, the ever increasing cost of labour, raw material and capital cost the manufacturer of bicycle can’t afford to keep the price of the bicycle within the reach of the poor man.  The MG Narega Scheme has taken a heavy toll of labour cost to labour intensive units.  Due to malfunctioning and other irrationalities in the scheme it is becoming unpopular both from government’s point of view and from the angle of the recipients of the benefits of the scheme.  It is high time to scrap the scheme itself in the interest of the economy of the country at large.

The capital cost by way of high interest also needs to be reduced.  Central Government levied 2% excise duty on bicycle in the last year’s budget.  This is not sustainable for the poor with a decreasing investible income.  This should be withdrawn because this impact of about Rs. 75/- is beyond the bearing capacity of a poor person with just earning less than Rs. 100 a day.

Our cycle industry is also declining partly due to the impact of cheap imports from China.  The effect of import from China will be noticeable when the FTA with ASEAN will be fully operative.

India is negotiating with European Union (EU) for Free Trade Agreement.  EU is putting tough conditions.  We should demand most preferred nations status for export of bicycles to Europe.  This will ensure 0% import duty on bicycles in Europe against the present 14%.

The global bicycle market is worth dollar 61 billion and 130 billion bicycles are sold every year globally.  China has a share of 66% in this export.

In order to boost the bicycle industry the duty drawback may be increased to 15% from the present 12.3%.

It is worth mentioning that industries like tyre making, fabrics and machine tools heavily depend on bicycle industry. With the boost to the bicycle industry these and other industries will also flourish.