Roadblocks for Indian automobiles

Sri Lanka’s recent raft of measures towards curtailing vehicle imports to ease pressure on the exchange rate has become a roadblock mainly for Indian car imports, motor traders complained.

The value of Indian car imports has dropped to US$ 36 million during 2017-18 period from $300 million, 3-4 years ago, they revealed adding that the industry is now in a wait and see attitude due to the present political turmoil.

Any tax reduction or concessions cannot be expected as the 2019 budget has also become a non- entity, motor traders said.

The Automobiles Mutual Recognition Agreement was under consideration in the Economic and Technology Cooperation Agreement ( ETCA) with India for further discussion, they disclosed.

Motor car imports have been discouraged heavily by slapping a 200 per cent LC margin and LTV requirements.

The government has also suspended the concessionary vehicle permit scheme that was available for selected public sector employees.

Marutis and Wagon R sales have dropped considerably, they disclosed pointing out that duty on a high- selling Suzuki Wagon R went up by Rs. 425,000 rupees, recently.

Central Bank officials said there was a foreign exchange outflow of $ 195 million to import cars below 1,000 cc engine capacity in the first five months of this year, up from $26 million in the corresponding period last year.

The mid- sized cars below 1,500 cc also recorded a rapid increase to $ 73 million this year from $20 million in 2017.

Sports Utility Vehicles ( SUV) also surged this year. Imports of the high- end SUVs cost $ 8.8 million this year, compared to just $ 2.6 million last year.

Prices of vehicles have increased by at least Rs. 300,000 as an impact of the depreciation of Sri Lankan rupee against the US Dollar, the Vehicle Importers Association Lanka ( VIAL) President Indika Sampath Merenchige said.

"As a consequence (to falling currencies), there has been a growing possibility that the importation of motor vehicles into Sri Lanka could accelerate in the period ahead,” a Central Bank official said.

The banking regulator believes that this trend should not be allowed to continue without a suitable response and it will review the new rule after six months, he added.