Hike in excise duty to push cycle prices up

The bicycle industry has come up with a mixed reaction to the 2012-13 union budget. The players in the industry, while welcoming the government’s move to put a curb on the import of cycle and its parts, say the 12 per cent increase in the excise duty (from the prevailing 10 per cent) will result in cycle prices moving up by Rs 100.

Overall, bicycle prices are all set to increase by Rs 100, according to cycle manufacturers.

O P Munjal, chairman of Hero Cycle which is one of the world’s leading manufacturers of the vehicle, says the resultant price rise will be “at least” Rs 100. The figure is identitical, according to the estimate of the United Cycle and Parts Manufacturing Association (UCPMA), which is one of Asia’s largest organisations of its kind.

Even so, Gurmit Singh Kular, president of the UCPMA, has hailed the budget as it tried to put a check on the import of bicycle and its parts by increasing the custom duty on bicycle from 10 to 30 per cent and and bicycle parts from 10 to 20 per cent.

D S Chawla, who formerly headed the UCPMA, says the move will “at least put a partial check” on the import of cycle parts that was happening mainly from China. Cycle imports from China had been increasing over the last few years. “Parts worth more than Rs 1500 crore were being imported by cycle manufacturers and suppliers in Ludhiana,” he adds.

Avon Bicycles cautions that the hike in custom duty will prompt cyle-parts manufacturer who import material from China to resort to “under-invoicing” so as to evade custom duty. “Hence,” according to Onkar Singh Pahhwa, the company’s managing director, “one needs to set up a mechanism to materialise the purpose of provision.”