AMP: Industry wants status quo on customs duty

AMP 2006-16 envisions that India will retain its 4th global rank as truck manufacturer and the commercial vehicle segment will continue its bull run with double digit growth, as in the last fiscal. Though the segment has grown at a compound annual growth rate of 4.4 per cent over the last decade, the performance in 2005-06 has been high at over 10 per cent.

The industry is concerned with the falling import duty rates which at the current peak rate of 12.5 per cent are among the lowest for the segment in the world. The bound rate of duty for the segment under WTO is 40 per cent.

“Compared to developed countries like US and EU, our commercial vehicle segment is at the receiving end with very low applied rates. The threat of widespread imports is as much from new vehicles as with used vehicles,” said Society for Indian Automobile Manufacturers (SIAM) director general Dilip Chenoy.

The fears are not entirely misplaced. Imports of trucks went up by 470 per cent in 2005-06 over 2004-05 up from $4.06 million to $19.09 million. In quantity terms the growth has been to the tune of 638 per cent. Looked at in isolation the numbers may not mean much considering that it is a miniscule 0.2 per cent of the overall production in 2005-06, but they’re still higher than the production of Volvo India and Tata Trucks together in 2005-06. Further, the 2.5 per cent reduction in customs duty in last year’s budget is expected to have given some amount of fillip to imports.

“The two companies together produced less number of trucks (732) than imports (830) and if imports had not taken place both these companies could have performed better and there could even been further investments for setting up manufacturing facilities to cater to the demand,” Chenoy added.

While AMP is silent on applied duty for used trucks, SIAM wants duties for used vehicles to be pegged upwards to 40 per cent. “Used vehicles do not do any good to the industry and are catastrophic for the domestic players. Government policies should take cognisance of the serious threat that import of used vehicles present. We do not want India to become another dumping ground neither do we want it to join the list of countries like New Zealand where the domestic industry itself has been wiped out,” said Ashok Leyland managing director R. Seshasayee.