Dubbing this practice as "escape route", industry insiders say that some bicycle importers are importing cheap Chinese bicycles via other countries by "circumventing" the law, resulted into a blow to the domestic bicycle makers.
"Some of the importers have now found a new way to import Chinese bicycles via Sri Lanka, Bangladesh under free trade agreements as import duty on bicycles and parts from these countries is about 6.4 per cent as against duty of 20 per cent (parts) and 30 per cent (bicycles) from China," Federation of Associations of Small Industries of India, National President, Badish Jindal told PTI today.
To keep a check on "flooding" of Chinese bicycles, the Centre had raised import duty on bicycle parts and components from 10 to 20 per cent and on "fully built" bicycles from 10 to 30 per cent.
Industry experts opined that importers are misusing South Asia Free Trade Agreement (SAFTA) by importing bicycles and parts from Sri Lanka, Bangladesh at lower amount of import duties. Bicycles and parts are also being imported from Malaysia and Thailand, they said.
"Some importers are misutilising free trade agreements signed with several countries...They are bringing Chinese bicycles by circumventing the law," Satish Dhanda, Convener (Bicycle Panel), Engineering Export Promotion Council, said.
Dependency on Chinese bicycle and parts have grown over the years as import has risen from Rs 1,600 crore in 2010-11 to Rs 2,200-2,500 crore in the last fiscal, said Jindal.
Indian manufacturers are heavily dependent on China for several high-end bicycles and parts like basket, spoke, air-pumps, hub-cup, hub-kone, carrier, bicycle chain, handle bolt, brakes among other items.
"Chinese bicycle parts are 15-20 per cent cheaper than they are manufactured here," Jindal said.
"We had got a study carried out six months back in Ludhiana and it was emerged in the survey that several units which manufactured air-pumps, spoke had closed down because of heavy import from China," said Jindal.
Industry representatives also pointed out that some of unscrupulous importers even got indulged in "under invoicing" in order to neutralise the impact of custom duty.
Industry sought from the government to either suspend free trade agreements or fix a minimum floor price for import of bicycle and its parts in order to provide protection to domestic bicycle industry.
Ludhiana, a major industrial hub, caters to country's over 90 per cent bicycle and bicycle parts requirements and it houses prominent brands such as Hero Cycles, Avon Cycles.