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Peace dividend

With the 26-year-old civil war coming to an end in Sri Lanka, India Inc. is on the threshold of a never-like-before opportunity to do business with the island nation.

N. Madhavan | Print Edition: August 9, 2009

With the 26-year-old civil war coming to an end in Sri Lanka, India Inc. is on the threshold of a never-like-before opportunity to do business with the island nation.

The celebrations that broke out in May after the Sri Lankan army announced the killing of LTTE chief V. Prabhakaran, at the end of a long and tumultuous civil war, were not restricted to just the streets of Colombo. There was considerable excitement in the corner offices of many Indian companies—an excitement that was born out of the opportunities that a peaceful Sri Lanka offers. Strategy meetings soon followed to garner a good share of the “soon to boom” Sri Lankan consumer goods market and/or the reconstruction (in the north and east) pie.

After one such meeting, an Indian cement company (which did not wish to be identified) has set its sights on the government-owned Kankesanturai cement plant, one of the two integrated cement plants in the island. It may be in ruins—but it sits on huge limestone deposits.

Airtel, Ashok Leyland, IOC, LIC, Maruti, Bajaj Auto are among the major Indian companies in Sri Lanka
All of them expect business to grow faster with the end of the civil war
Many new companies are looking to enter the country
Cement, infrastructure development, steel and dairy farming are the most promising sectors

With Sri Lanka being cement-deficit and considering the extent of reconstruction work that needs to be done in the north/east, many Indian players are busy exploring the possibility of setting up fresh capacities. At present, UltraTech Cement, Gujarat Ambuja and a few others export cement to Sri Lanka.

Commercial vehicle major Ashok Leyland is also on the move. It is already a market leader in Sri Lanka, through its JV with Lanka Ashok Leyland (LAL), in the bus and truck segment, in which it has a 65 per cent share. LAL has begun upgrading its service network in Jaffna, Trincomalee and Vavuniya.

Commercial vehicle sales increased every time hostilities ended and the highways connecting north and south reopened. LAL’s sales touched a high of 3,600 units in 2005-06 period after the ceasefire agreement between LTTE and the Sri Lankan government. Last year (2008-09), it dropped to 1,200 units in the wake of the war. “We expect sales to pick up now that peace is set to return,” says Rajinder Malhan, ED, International Operations, Ashok Leyland.

Agrees Mayank Parekh, Managing Executive Officer (Marketing and Sales), Maruti Suzuki: “Overall demand should pick up now that the war has ended. We expect demand for small cars to rise sharply. We are prepared.” Maruti is the market leader in the new car segment.

The war and the liquidity squeeze that the global meltdown brought about has shrunk consumption in Sri Lanka. “On an average 1.80 lakh two-wheelers and 45,000 threewheelers were sold annually. But these numbers have come down by 30 per cent. We expect these figures to increase as the year progresses. When that happens, we will get our share,” says H.S. Goindi, President, Marketing, TVS Motor.

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