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China hacks free trade route, choking Punjab’s bicycle industry

July 25, 2019


China hacks free trade route, choking Punjab’s bicycle industry

The dragon is evading customs duty, entering the Indian market through free trade route meant for Bangladesh, Sri Lanka.

Ludhiana, Punjab: The state’s bicycle industry is huffing and puffing to survive as cheaper Chinese imports, allegedly entering India through a free trade agreement China is not even a part of, are putting them out of business.

Pradeep Wadhwan, vice-president of United Cycle & Parts Manufacturers Association (an umbrella organisation of cycle manufacturers of Ludhiana), told 101Reporters 200 bicycle manufacturing units have had to shut shop in the face of the competition. He said owners of these units have either switched their business or have become dealers of bicycle parts.

At the heart of bicycle manufacturers’ grouse is how China has gatecrashed the Indian market through the South Asian Free Trade Area (SAFTA) pact, which came into effect in 2006. The agreement paved the way for the eight-member countries to reduce customs duties of all goods traded among them to zero by 2016. China isn’t a party to the pact but is reaping its benefits still.

Badish Jindal, president of the Federation of Punjab Small Industries Associations, said China has been placing its proxies in Bangladesh and Sri Lanka. He said the Asian superpower has been supplying its bicycles in India through these SAFTA countries, dodging the customs charges it would have had to add to the item’s cost.

He said the tariff-free trade route has come as a curse for the bicycle industry of Ludhiana. “It is surprising and impossible that countries like Sri Lanka and Bangladesh, which had no or little cycle industry, started manufacturing every cycle part within a few years and their exports to India swelled to millions within a short duration of time.”

Number speak

Government data on bicycle imports shows that as import from China fell from Rs 262.7 crore in 2011-12 to Rs 153.8 crore the next year, Bangladeshi and Sri Lankan imports picked up at a rapid pace. This trend continued till 2015-16, when Chinese imports dropped to Rs 67 crore and Bangladeshi and Sri Lankan imports reached an all-time high. (However, import from China grew again between 2016 and 2018 as import from Bangladesh slid)

India did not import bicycle or cycle parts from Bangladesh between 2006 and 2010. It was only in 2011 when imports worth Rs 5.1 lakh took place. The next year saw import to the tune of Rs 1.4 crore. The meteoric rise continued till 2016-17, when the figure reached Rs 41.2 crore. While Sri Lanka had exported bicycles and cycle parts worth Rs 1.1 crore to India in 2006-07, the number touched Rs 81.1 crore in 2017-18.

Industry analysts opine that the government needs to take steps to protect the future of the country’s bicycle sector. SC Ralhan, former president of Federation of Indian Export Organizations, said the government needs to check any misuse of the free trade route so that the interests of the local manufacturers are not compromised. Jindal said Ludhiana’s bicycle industry has raised the issue several times and written to the Centre but hasn’t received a satisfactory response.

There are about 4,000-4,500 cycle manufacturing units in Ludhiana. Most of these small units supply cycle parts to bigwigs like Hero and Avon, also located in the city. The bicycle industry in Ludhiana is under stress as it is as the major players have opened manufacturing units in other states too.

India is said to be the world’s second-largest bicycle manufacturer, with an annual turnover of Rs 6,000 crore.