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Sri Lanka ups import duty on Indian automobiles to favour China

New Delhi/ Colombo, Dec 12 () : Sri Lanka has increased the import duty on automobiles from India by 100%  to favour China.

After Maldives, it is the turn of Sri Lanka to thumb its nose at India. India is now trying through diplomatic channels to ask the Sri Lankan government to bring down import duty on automobiles shipped out of India.

India automobile export market was $6 billion and Sri Lanka import bill was worth $800 million. Sri Lanka at first targeted small cars, bikes and three wheelers. Now it brought sports utility vehicles in the ambit thereby hitting the entire market.

Seeing the Sri Lankan market closing down for India, Society for Indian Automobile Manufacturers (SIMA) cancelled its auto show.

Maruti Suzuki’s small car market is very big in Sri Lanka and with higher import and customs duties is planning to set up a car assembly plant in Sri Lanka with a local partner. Maruti’s export market has Sri Lanka in the top five buyers and it does not want to close it down. It marks its first step outside the country.

Sri Lanka last year bought 15,000 units from Maruti while its total purchase of new cars was 29,000. Including factory owned second car sales the total buy of the island nation was 59000.

At start of this fiscal, duties shot up from 120% to 200%. Apart from this,the minimum assessable value was raised to SLR 7.5 lakh with a view to put the small cars unviable. A Maruti car priced at SLR 5 lakh would be valued at SLR 7.5 lakh and 200% duty imposed on it. This took away the Maruti’s edge on price.

Maruti is now toying with the idea of an assembling plant which will put together the kits and parts sent from India. The hitch is that 40% of parts has to be sourced locally and the market size is too small.

Chinese car manufacturer Geely set up a manufacturing unit of $10 million investment with local partner in Sri Lanka and this could be reason for hike in import duty, says SIMA.