The sudden surge in the imports of bicycles, cycle parts and sports goods from nations like Sri Lanka and Bangladesh has got the Indian government thinking about the possible misuse of South Asian Free Trade Area (SAFTA) route by China and put imports from SAFTA countries under the scanner.

The import of bicycles, especially from Bangladesh and Sri Lanka, increased substantially in the last seven years and broke the backbone of the industry in Ludhiana of Punjab, considered the hub of cycle manufacturing.

After many representations and warnings by Punjab-based industrialists, the Ministry of Commerce and Industry set up a probe into the alleged misuse of the agreement. The ministry wrote in a memorandum issued in the first week of September: “It has been mentioned in the representation that most of the imports from China are coming under-invoiced and through SAFTA and ASEAN countries to save custom duties. It has been requested to check the trade policy with China and to keep a watch on imports from SAFTA and ASEAN countries.” It was addressed to under-secretary to the Government of India, Kamna S Dikshit. 

The under-secretary has been asked to examine the imports and take appropriate action.

SAFTA countries include Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, which signed an agreement to promote and enhance mutual trade, economic cooperation, concessions and duty-free imports. SAFTA came into force in 2006. Surprisingly, import of bicycles and other goods increased manifold some years after the route opened, raising suspicions that China was routing goods via SAFTA countries to escape duty.

Former Vice-Chairman of National Productivity Council (NPC) and president of the Federation of Punjab Small Scale Industries Associations Badish Jindal says China was using the SAFTA route to dent manufacturers in India, and the Union government had initiated a probe into the issue. 

Jindal said that before 2010, there were few or no imports from Sri Lanka and Bangladesh, but suddenly, imports went up, indicating that China was using the trade route for its gain. 

What made bicycle manufacturers suspicious of the SAFTA route is the fact that Bangladesh and Sri Lanka, that have no infrastructure to manufacture or export bicycles to India, suddenly became ‘manufacturing’ hubs. While there was no export of bicycles from Bangladesh till 2010, an influx of goods suddenly started from 2011-12.

According to the government data, in 2006-07, the year the SAFTA agreement was implemented, the import of bicycles from China was only Rs 29.76 crore, and from Sri Lanka was Rs 1.15 crore. Bangladesh entered the scene in 2011-12, exporting bicycles worth Rs 5.1 lakh. The same year, China and Sri Lanka exported bicycles worth Rs 265.89 crore and Rs 7.36 crore respectively. 

By 2015-16, manufacturers grew suspicious over the SAFTA route as import of bicycles from Sri Lanka and Bangladesh reached Rs 61.43 crore and Rs 36.58 crore respectively, whereas it was Rs 69.44 crore from China. Last year, import of bicycles from Sri Lanka touched a whopping Rs 163.76 crore, Rs 30.77 crore from Bangladesh and Rs 115.35 crore from China.

Harsimrat Singh Wadhwan, secretary of the United Cycle and Parts Manufacturers Association (UCPMA), one of Asia’s largest trade bodies, said the unusual increase in imports from Sri Lanka and Bangladesh made the industry doubtful. “While there is little infrastructure to manufacture bicycles and cycle parts in these two countries, their imports now matching and even surpass China. How is it possible?” questioned Wadhwan.

He said the Indian government has been told about this issue many times, but it is taking it seriously only now.

There are more than 4,500 bicycle and cycle parts manufacturers scattered all over Ludhiana, employing a migrant workforce from other states. Due to cheap imports from the SAFTA route, many manufacturers have now turned dealers of cycle parts and are importing goods, putting their own labels on them, and selling them in Indian markets.

This is the condition of many other manufacturing industries too, with Bangladesh and Sri Lanka becoming major exporters to India. The import of footwear from Bangladesh was only Rs 8.96 lakh in 2010-11, but touched Rs 60.50 crore in 2014-15, and increased to Rs 74.39 crore in 2018-19.

Sports goods industry

Vijay Dhir, exporter of sports goods in the manufacturing centre of Jalandhar, says that cheap Chinese goods have already hampered the sports goods economy and the use of SAFTA to dump goods was making the situation worse for manufacturers and workers.

Manufacturing of sports goods comes under cottage industry, providing employment to four-five workers in a single unit, while larger units employ hundreds of workers.  Dhir claims that at least 200 such units in Jalandhar have already downed shutters.

Lakhwinder Singh, president of Karkhana Mazdoor Union (industrial workers’ union) said that over the past five-six years, more than 4,000 workers in the cycle industry have lost their jobs, a claim that could not be verified as all migrant workers are not registered with the labour department. 

“Decreased manufacturing due to economic slowdown, the ill-effects of demonetization in 2016 and cheap Chinese imports have severely hit poor workers who come to Ludhiana to find work,” said Lakhwinder.