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Indian car exports face excise duty hurdle in SL

11 December 2012 01:16 am - 19     - {{hitsCtrl.values.hits}}

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New Delhi: Indian auto companies, facing the prospect of a slowdown in their home market, are also seeing an export market that accounts for around 13% of their exports dry up after Sri Lanka effected a steep increase in indirect levies that will make it all but impossible for them to remain competitive.

The move, which dates back to early November but is just coming to light, doesn’t single Indian firms out, but affects them the most because they account for 95% of the auto market in the island nation.

Through 2012, Sri Lanka has made it difficult for Indian auto exporters, first by increasing import duty significantly in April, and following up with the increase in excise duty.

Sri Lanka has increased excise duty on utility vehicles to 173% from 100% previously. Total duty on cars less than 1,000cc increased from 120% to 200%, including a 47% increase in excise.

The excise on three-wheelers was raised from 45% to 100%, and on two-wheelers from 61% to 100%. Colombo has also imposed an absolute levy of Sri Lankan rupees 109,000 on commercial vehicles, besides a 12% excise duty. The new structure came into effect on 9 November.

“We are still trying to evaluate the impact of the development. The impact of it has been negative and exports of vehicles to Sri Lanka has completely stopped,” said Vishnu Mathur, director general, Society of Indian Automobile Manufacturers, or Siam, an industry lobby group. Domestic sales of cars declined 8% in November, in a month when they were expected to rise.

New Delhi has taken note of the developments in Sri Lanka.

“We believe the very substantial rise in import tariff in Sri Lanka is going to adversely affect our car exports to Sri Lanka, so we are concerned about it,” Rajiv Kher, additional secretary, ministry of commerce, said in New Delhi on Monday.

According to Siam, Sri Lanka is the largest export market for Indian automobiles. In 2011-12, out of India’s $6 billion worth of auto exports, Sri Lanka accounted for $800 million.

The relationship between the two countries has been testy in recent times over the issue of the treatment of Sri Lankan Tamils and also after some fishermen from Tamil Nadu were captured by the Sri Lankan coast guard for allegedly straying across the maritime boundary.

Mint reported on 12 October that state-run power utility NTPC Ltd’s plan to build a 500 megawatts (MW) plant in Sri Lanka has been indefinitely delayed, in part because of the protests by Tamil Nadu against the Sri Lankan government.

The $500 million power project to be set up as an equal joint venture between NTPC and Sri Lanka’s Ceylon Electricity Board (CEB) is an integral part of India’s attempt to engage Sri Lanka politically and economically at a time when China is becoming increasingly influential in that country. The changes in import and excise duty have already affected India’s exports to Sri Lanka, said a senior Siam official who spoke on condition of anonymity.

“In the current fiscal, two-wheeler export to the country has declined by 70% and cars and utility vehicles by 90%. The new duty structure seems to be targeted at us more than anybody else,” this person added.

The industry lobby and India’s department of heavy industries are discussing a possible solution with Colombo. Meanwhile, Siam has also put on hold a January auto show in Sri Lanka, the official added.

He said second-hand cars “coming in from Japan and Singapore” are not affected by the incremental levies. Sri Lanka doesn’t have local car makers.

Prasad Kariyawasam, Sri Lanka’s high commissioner to India, said the increases in excise duty are not targeted at any one country. “Duties on cars have been increased across the board so it’s not only cars from India but across the world. The increases are on certain types of cars,” Kariyawasam added.

The Sunday Times (not to be confused with the UK paper), a weekly newspaper in Sri Lanka, termed the duties as “prohibitive” and said it “may edge out Indian vehicles from Sri Lanka’s market while the exemptions to those coming from Japan will give them an added advantage in the market”.

Another Sri Lankan newspaper, Business Times, said the government had “controversially reduced duties on racing cars while increasing excise duty on small cars with engine capacity of less than 1,000cc.”

The newspaper said “this has shattered the dream of Sri Lanka’s middle income earners in owning a small vehicle with the Maruti 800, said to be the cheapest small car (in Sri Lanka), going up by at least Rs200,000 (Sri Lankan rupees).

Quoting an anonymous Sri Lankan customs official, The Sunday Times said the “technicality placed imports of cars from Japan at an advantage. While 90% of cars imported into Sri Lanka are from India and under 1,000cc engine capacity, no such vehicles are brought from Japan”. (Source: Live Mint)
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  Comments - 19

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  • Kiri Hami Tuesday, 11 December 2012 04:55 PM

    Good lesson to India for trying to bully it's neighbors....

    rajiv Tuesday, 11 December 2012 05:29 PM

    Indians r very shrewd so Our President is playing very well.

    Huna Tuesday, 11 December 2012 04:35 AM

    Some good news from SL Finally !!

    AJI Tuesday, 11 December 2012 10:33 AM

    I also hate Indian cars and bought same as I don't have money to buy a Japanese car. Can we use chinese cars???

    OMG Tuesday, 11 December 2012 05:21 AM

    If we could build a underground railway system in Colombo and suburbs the vehicle usage could be halved overnight.

    If there was a decent public transport system I would love to leave my vehicle at home and save the stress even if it costs the same.

    roy Tuesday, 11 December 2012 12:28 PM

    well done, carbon emmsion can reduce in colombo city.no more bandematuram in srilanka.

    kumar Tuesday, 11 December 2012 06:46 AM

    If you can supply the Japanese hybrid cars for the price of Maruti and Nano, no need to educate the people about the advantages of Japanes cars.

    J P Rajan Tuesday, 11 December 2012 06:49 AM

    Anyway I hate indian cars!!!1

    Lobo Tuesday, 11 December 2012 07:10 AM

    In retaliation for voting against us at the UN council and for the years of crappy treatment and bullying?

    DH Tuesday, 11 December 2012 07:17 AM

    If you want an Indian car ask the makers to open a factory in Sri Lanka. This is a good encouragement for them to open a factory here. Countries like India, Malaysia etc has strict import controls to encourage manufacturers to open factories in that country but we couldnt even get Indians to open a threewheeler factory!

    buwa Tuesday, 11 December 2012 07:24 AM

    Try to buy a used japanese car which falls within ur budget then you will get necessory safety and relability and you can use it for long. Also you can resell it at a better price which is not the case with indian cars.

    If you decide on an Indian car please make up ur mind that you gave ur money on charity and make up ur mind.

    Actually I cannot imagine why people decide on indian car. Dont think that I'm anti-Indian. But it is a fact!

    Any ideas please!!!!

    sach Wednesday, 12 December 2012 06:47 AM

    how bad indian cars doesnt matter, it fits the budget of majority of the Lankans. The truth is lankans are getting poor. The ones who used to buy Japanese ones are switching to indian ones. Also indian cars are not bad as they used to be. SL gov has royaly f***d up our economic policies. That is y SL is compelled to such a drastic step.

    Personally i dont think this is a good thing. It targets the low middle income earners while letting the rich import lamboghinis. India is our neighbour and biggest partner in culture, economy, defence. This step can send a negative signal.
    If Lanka has a local manufacturing facility for vehicles under 1000 cc it is understandable. However it is not a case like this.
    If reducing imports and wastage is the concern gov have far great things to do.

    whatever our ppl say, importing from india is good for us. Minimum shipping distance so less cost.

    sach Wednesday, 12 December 2012 06:48 AM

    india is not an angel, but our leaders had gave many outsiders the chance to exploit SL issues. And they still do.

    Maximilian Tuesday, 11 December 2012 08:01 AM

    Mr.Thomas, Indian cars are meant for people who has no clue about cars, has no taste and has absolutely no idea about the maintenance cost and the repaires...European cars are not climatised for this country so, lets not worry about Lamborghinis. But, we should promote Japanese cars as over a period of 10 years maintaining a Maruti would definitely cost more than a mid range japanese car...and also you can forget about the second hand value of big brother's cars as no one wants to buy them after you remove the Polythene covers.

    Omattage Perera Tuesday, 11 December 2012 02:28 AM

    Indians should wake up and consider that they should start assembling cars in Sri Lanka rather than importing them to Sri Lanka.

    When India change and restrict Sri Lankan exports, Sri Lanka can complain to nobody and have to grind and bear. Why should it be changed for indian exports to Sri Lanka.

    Adapt and do your business if you want to be competitive!!!

    Shihan Tuesday, 11 December 2012 08:26 AM

    Well said. when are we going to have our own Mass rapid transport system. its high time. over to you president. please do it and you will be remembered forever

    FaisalS Tuesday, 11 December 2012 02:40 AM

    Typical Indians whining and wailing. Look at how many blocks they have placed on the FTA between the two countries and yet they have the temerity to complain here.

    Maximilian Tuesday, 11 December 2012 02:50 AM

    Well said Mr.Perera.In addition I hope there will be a concession on hybrid cars at least next year and also the Japanese Auto industry could educate the public about the advantages of owning a Japanese car over a crapy Maruti or that death trap Nano.

    Thomas Tuesday, 11 December 2012 02:52 AM

    Indian Cars are meant for the Middle class & the poorer section, while the Rich enjoying importing Lamborghini's, on very less duty. WHY PENALIZE THE WEAKER SECTION OF THE SOCIETY? Please reduce duty on Indian vehicles forthwith.


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