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Cycle makers want zero excise duty on bicycles

PTI     January 24, 2013
Hit hard by declining sales, bicycle makers have asked the government to fully withdraw 2 per cent excise duty on cycles in the upcoming Budget to give the sector a boost.

Besides, in pre-Budget memorandum, All India Cycle Manufacturers' Association (AICMA) has said that it wants the government to provide incentives to the industry by providing subsidised bicycles to people below poverty line.

"The government proposals have created a big roadblock for the growth of the industry. From the last two Budgets, the government has been levying an excise duty of two per cent, which has affected the sector very badly," AICMA President Pankaj Munjal said.

Sales of bicycles have slipped by around eight per cent so far in this fiscal, he added. The Indian bicycle industry produces around 1.56 crore units.

"Sales are continuously declining and that has threatened jobs. Complete exemption from excise duty will cause a huge spurt in bicycle ownership and subsequent substantial productivity increase," said Munjal, who is also the Co-Chairman of Hero Cycles.

The industry employs around 1.25 lakh people, he added.

AICMA estimated that the roll back of excise duty will cost the exchequer about Rs 78 crore, but said this environment friendly means of transportation will help in uplifting the poor in many ways.

It has also proposed that the government provide subsidised bicycles to "the poorest of the poor" as it will have lasting effects in terms of creating self-sustained employment opportunities such milk delivery, and selling of various goods such as tea and grains, besides enabling independent transportation.

"Lower prices will stimulate affordability and thus demand for bicycles. There will also be rise in employment due to higher demand with approximately 14-18 per cent growth in the industry," AICMA said in its representation.

Besides, Munjal said India is losing out on export markets to China, which gives enormous incentives to cycle manufacturers.

"There is a huge cost disadvantage to Indian firms against Chinese manufacturers due to favourable government policies there. Chinese cycle prices are lower by at least 15 per cent than those from India," he added.

Of the total 1.56 crore bicycles produced in India, about 18 lakh units are exported every year. In comparison, the Chinese industry is estimated to be 8.45 crore, exporting 5.07 crore cycles.

"The Indian industry is just $1.2 billion at present compared to the $8 billion Chinese industry. However, we have the potential to grow to $5 billion with government help and support," Munjal said.

For incentivising exports, AICMA is asking the government to reimburse inland freight charges up to the port.

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