Is Indian reconditioned car import a viable option?
Is Indian reconditioned car import a viable option?
Amid stiff opposition by different quarters, the government is weighing an option of allowing import of reconditioned vehicles from India. It has asked the ministry of commerce (MoC) to submit a report before the parliamentary standing committee on MoC in the next meeting of the latter, identifying the obstacles to the import and reviewing the existing market condition.
Import of reconditioned cars from India, especially TATA trucks, is high on the agenda of the MoC in its next meeting. The MoC will submit a report on this to the parliamentary standing committee then. As there is currently an embargo on import of the Indian reconditioned vehicles, the government wants to open up the market by removing the barriers. Presently, Bangladesh imports brand new vehicles -- trucks and motorcycles -- from India which are lighter than the reconditioned ones.
Local car importers say India considers Bangladesh as a third category market and supplies substandard goods, made of sub-standard or low quality materials. As a result, the users need to buy an increased number of spare parts and the vehicles' life time is very short. This is evident in case of taxicab import in 2000 from India that ended up in total disaster.
Local stakeholders have strongly opposed the government's move, saying that allowing import of Indian reconditioned vehicles would further increase the environment pollution. Even the new vehicles, imported from India, are not environment-friendly. They question, since the life-span of Indian vehicles is short, how can the reconditioned ones be better or suitable to our conditions and needs?
Bangladesh Reconditioned Vehicles Importers and Dealers Association believe India is actually planning to make Bangladesh a dumping ground for old vehicles. As such, the country is trying to dump its reconditioned vehicles in Bangladesh through some agents. Many of the Indian vehicles are not even recyclable and the people will get just cheated by buying the those reconditioned vehicles without knowing much about them. Cheap and low standard vehicles will enter Bangladesh through under-invoicing and paying less import duty, they allege.
Every year nearly 8,000 trucks, 2,000 buses and 5,000 brand new mini-trucks enter Bangladesh from India. Those who are in favour of Indian reconditioned car import claim that the quality of Indian vehicles is now better than in the past. A local car assembling plant - Nitol-Niloy Group - is now working on setting up a pick-up manufacturing unit in Bangladesh.
More than 80 per cent of Bangladesh's imported cars are either reconditioned or used, permissible as per stipulations of the Import Policy. So far, reconditioned vehicles are imported mainly from Japan and used by the middle income group. Earlier banks used to finance up to 80 per cent of the value of a car, which has lately been reduced to a maximum limit of 50 per cent. Due to the alleged discrimination in pricing and taxation of imported new and used cars, many auto showrooms have already been closed down and a good number are also going to be closed shortly.
Against this backdrop, the country's reconditioned car importers and dealers made a veiled warning to the government that they would go for a greater movement if the government does not remove discrimination in pricing and taxation on import of reconditioned vehicles. The dealers say import of reconditioned cars from Japan has fallen drastically by 65 per cent last fiscal year which forced thousands of employees to be jobless.
Most of the countries including India, Sri Lanka and Pakistan, also import reconditioned vehicles. They import such items from Japan and calculate up to 90 per cent depreciation depending on the vehicles' proven quality. Even India, which itself produces new cars, allows up to 70 per cent depreciation on import of Japanese reconditioned cars whereas Bangladesh allows only up to 35 per cent depreciation. This is being interpreted as a conspiracy against Bangladesh's import of reconditioned cars.
Bangladesh has been a growing market for the Japanese reconditioned vehicles for the past few decades and the pace has been accelerating significantly for the last few years. Importing reconditioned vehicles has been in practice since the '70s in the country and the business has been rather good. Now it is in dire straits and revenue generation from this sector has fallen drastically. Experts believe the government's move to import Indian reconditioned cars will make the situation more critical.
The prices of imported reconditioned cars have registered a sharp rise. Devaluation of taka against dollar and dollar against yen is the reason. A Toyota Corolla-6 Model car which was Tk 1.5 million sometime back is being sold at Tk 2.0 million. Prices of other brands cars have also recorded rise. An intending buyer could buy a Corolla-1 model with a down payment of Tk 0.7 to Tk 0.8 million, but now he has to pay Tk 1.7 to Tk 1.8 million to get the car.
Importers had to obtain certificates from Japan Auto Appraisal Institute (JAAI), the only organisation of the Japanese government to conduct export inspections of used cars. In an apparent move to make car import from Japan more difficult, the National Board of Revenue (NBR) has proposed to obtain a roadworthiness certificate from a Japanese registered company, Japan Export Vehicle Inspection Centre Co Ltd (JEVIC). JEVIC is involved in pre-shipment inspections or certification of used vehicles.
Experts say JAAI itself was enough to certify used cars' age, fitness, costs and roadworthiness. The cost will be higher if the importers are forced to obtain two certificates for the same purpose. Every importer used to spend Tk 3,375 to get a JAAI certificate for the inspection of each car. But now an importer will have to spend Tk 48,700 more to get the same certificate! Such move essentially means that the government wants to discourage import of used cars from Japan to fill the market with low-quality Indian cars.
Automobile specialists claim that the government's plan to cut the minimum age for imported cars would open a floodgate for low-quality Indian vehicles into Bangladesh, depriving customers of good-quality Japanese automobiles and the government of huge revenues. A reconditioned Japanese car's base price is higher -- almost double the price of a new Indian car. Importers of Japanese cars pay higher tax than those of Indian cars. The government will lose a huge amount of revenue if Indian cars are imported in large numbers.
Taxicab business in the country suffered a huge jolt when Bangladesh imported hundreds of taxicabs from India. The low quality taxicabs made in India did not last more than two years. As a result, 80 cab companies went bankrupt.
The Japanese cars are not hazardous for the environment compared to the Indian vehicles, which was proved in a test in 2003 arranged by the World Bank, the Society for Urban Environmental Protection and the Department of Environment in Bangladesh.
The parliamentary standing committee, which is expected to sit very soon on the issue, should take such observations of the experts and stakeholders into cognisance and adopt final decision on car import suiting the country's present situation and environment. Vested quarters should not be allowed to interfere in the decision-making process.