India may ask Sri Lanka to cut automobile tariffs: report

"India is mulling various options to deal with the situation," India's The Hindu newspaper quoted additional commerce secretary Rajeev Kher as saying.

"One of the options is to approach purely diplomatically, and request the Sri Lankan Government because it is a win-win situation if they cut down the tariff."

Small cars made in India and Malaysia had helped improve living standards of Sri Lankans. The cars also brought billions of rupees in revenues to Sri Lanka's high spending state which runs large deficits.

After the prohibitive tax hikes revenues fell as analysts had warned that it would.

Taxes were raised twice in 2012 after Sri Lanka's monetary system ran into balance of payments trouble due to a steep rise in bank credit taken to manipulate energy prices which were in effectively accommodated by central bank credit though sterilized forex sales.

The report quoted Society of Indian Automobile Manufacturers (SIAM) Director General Vishnu Mathur as saying that last year out of 6 billion US dollars of auto exports from India, about 800 million US dollars worth went into Sri Lanka.

"Now this has almost gone," he Mathur said.

Sri Lanka also imports three wheelers and motor bicycles from India.

Another report said Chinese manufacturers are being allowed to set up assembly plants in Sri Lanka which could potentially export products to India without duty.

Under a free trade deal between the two countries India has cut taxes on a large number of products while nationalist business had placed a bigger negative list blocking the trade freedoms of Sri Lankans hitting the poor in particular.

Rent-seeking Sri Lankan businesses have placed a 'negative list' of 1,198 items on the Indo Lanka free trade deal while Indian authorities have allowed their businesses to block the trade freedoms of their citizens by only 196 items.

Local assembly or any protected domestic industry engage in tax-arbitrage collecting as profits what would have gone to the state as taxes, while keeping overall prices high for the general public, particularly the less well off.

There are however 'rules of origin' which can make re-exports of items without sufficient local content difficult.

Analysts say 'rules of origin' themselves are a protectionist legacy in areas with free trading peoples and global supply chains.

In areas where people are winning more trade freedoms from rulers and nationalist businesses such as East Asia and the US, global supply chains have sprung up and business are forced to keep quality up and prices down allowing people to move out of poverty quickly.

Sri Lanka has a system of taxation where duties are hatched secretly and jacked up by midnight gazette literally while citizens are sleeping, violating the principle of 'taxation by consent' established through the Magna Carta of England which set the foundation for liberty of the citizen and the restraint on rulers.

READER COMMENT(S)

9. Rohan Samarajiva Dec 14

The greatest achievement of Sri Lanka foreign policy was keeping India onside for Eelam War 4. The heroes of that episode were Gotabhaya Rajapaksa, Basil Rajapaksa and Lalith Weeratunge.

The current amateurish handling of Sri Lanka's relations with India have the potential of unraveling the gains of 2007-09. It's time to open the back channel again. And stop playing petty games.

8. Roh Dec 14

Ref: Liberty.
What Liberty says is absolutely correct. Our people should not be forced to make consumer decisions based on nationalistic agendas of foreign powers.

The irony here is not that non-Indian vehicles are a lot more expensive. If the oppressive taxes are removed, a 3-year used Japanese motor vehicle would be absolutely affordable at around US13,000 CIF + 50% Taxes. Mind you, consumers would be still getting a very reliable, high quality vehicle for that price which will easily last 10 years+ with proper maintenance.

It beggars belief what our policy planners do behind closed doors. The crux being none of these officials are actually affected by taxes as they all enjoy free vehicles paid for by the citizens of SL. So who cares and why bother?

7. liberty Dec 13

India is worried about tariffs because in a nationalist dehumanized world, things are upside down. It is we Sri Lankan who should be agitating to win the liberty of spending our hard earned money the way we want.

Whether a householder who saves money honestly spent his money on an Indian, Japanese, Korean or the car made in the moon is his own business and no one else's.

We do not need production lobby gatekeepers to tell us where to spend our money through their new colonialism of police power and customs. It is an absurd fact of a nationalist world that foreign exporters are the ones who wins our trade liberties for us. It is the case not only here but in any country where citizens are oppressed with trade restrictions.

No control freak person should be able to impose their preference for a car from a particular country, manufacturer, or brand on another person through police power.

As regards to some other comments. India exports to many countries including the UK. Many manufacturers have set up shop there including Hyundai and Nissan which is export oriented. India is overtaking many other Asian countries.

Dumping is simply an argument by profiteering inefficient domestic production lobbies to force the less affluent to spend more on goods they can ill afford.

TATA was building locomotives from the previous century. That India regressed after independence was due to state interference (especially in motor inability to pay for technology like royalties etc), not due to the lack of human endeavor.

Indian trucks are workhorses, any fleet owner or businessmen will tell you. Spares are cheap and robust.

If a person buys something for half the price he has more money left to spend on other goods. i.e total space to buy goods in the economy increases giving opportunity for other domestic industries to come up if they want.

6. Roh Dec 13

Why do you think India is so agitated by our tariffs? That's because nearly 20% of their sub-standard vehicles are dumped in SL. How come we don't see Indian vehicles in countries like Malaysia or Singapore? Indian vehicles are meant for third world countries!!

Our Government should introduce a vehicle compliance system like in Australia where every new model imported into the country have to first pass a compliance test. This includes crash testing, metal thickness, safety, fire testing, fuel emissions etc. Every car importer whether they be BMW , Mercedes, Toyota or Honda have to first get their cars approved through compliance before they begin imports.

Sri Lanka must move away from these junky Indian vehicles. Three wheelers should be banned at least in Colombo and those drivers be entitled to low duty imports of mini or micro models.

But knowing how things work in SL, the company that imports three wheelers will bribe the officials and it will be business as usual.

5. GSR Dec 12

India has 15% of the world's population but accounts for only 1% of its industrial output. Whatever it does build- in terms of cars, scooters, trains, etc- is only for its own domestic market as it can't compete with Germany, Japan, Korea or even the fast-rising China in terms of industry.

Hindus may be good with call centres and some software programs that require some thinking but physical activity (like building roads, cars, etc) they are not competitive in.

4. Chaminda Dec 12

I think we need to handle this situation in a more diplomatic manner. we must not forget the mistake made by President J.R. Jayawardena during late 80's, where we suffered a 30year old bloody war.

India will always be our big brother and our closest neighbor, why fight with them when we can easily use them for our benefit and create more opportunities into Indian market which is about 1.3 billion. We should always be the rose between two thrones and use India and China for our benefit.

3. shamindra Dec 12

3 wheelers are a menance - we dont have roads in colombo so to increae tax on vehicles are required.

3 wheelers design is also flawed, where they almost to a turn before they can see behin traffic.

2. Paradise Dec 11

I hope SL doesn't give in to indian pressure, or else we'll end up like Nepal. Where things happen the way India wants. Indian cars are of very poor quality, with almost zero safety standards.

Poeple should be allowed to buy jap cars which has much lower maintenance costs over time and will fetch a better a price in the secondary market. Hopefully over time SL will move towards european cars which are much better than jap cars ..

1. Roh Dec 11

In a way the restriction of Indian vehicles to SL, especially three-wheelers is a blessing in disguise. SL should move away from three-wheelers into more fuel saving, safe, more environmentally friendly vehicles such as mini cars, hatch backs and hybrid vehicles.

I don't buy the argument that the three-wheeler is a common man's mode of transport. This is a notion that has been propagated for years by one particular company that has pocketed billions selling these pests on our roads. Why should SL continue to embrace this terrible vehicle when other are moving away from it?

Its heart-breaking to know that we in Australia pay only about 25% of what our friends pay in SL for a family car. For instance I bought a 2013 model Honda Civic for my wife for just AUD 21,000. I was told by friends that this car fetches millions in SL. To me this totally defies logic while politicians get these for free. How can young people in SL have aspirations of bettering themselves with such draconian tax laws?