The figure 4,092 might seem a drop in an ocean compared to the more than 5 lakh tractors that were sold in India last year. But that 4,092 was only 20 a mere two years ago. India, which has witnessed 9 consecutive months of declining tractor sales and a 13% decline in total sales in 2014-15, has witnessed a 200-fold increase in the import of Thailand made tractors over the last two years. All on the backs of a Free Trade Agreement allowing import at 0% duty and a glitchy domestic duty structure which has hamstrung Indian competition in its own backyard.

Commerce Ministry figures for the last 3 years show Thai tractor exports to India go from 20 units in 2012-13, to 2,330 units in 2013-14 to finally clock in 4,092 units at the end of 2014-15 - a 200-fold jump in 2 years. Even more notably, Thai tractors exports to India were zero before 2010-11.

While the total share of tractors imported from Thailand are minuscule compared to the huge domestic market, forming only 0.7% of the total units sold, Indian manufacturers are concerned at the pace of growth. Especially during a period in which the domestic market has been falling. “It is a very small segment. But these things keep gathering pace,” pointed out S Chandramohan, president and Group CFO of Tractors and Farm Equipment (TAFE). The reason why tractors from Thailand, upstarts in the truest sense, have managed to win over Indian competition is quite simple - they are cheap. The average cost of a Thai made tractor on the retail market is around Rs 13-14 lakh. The closest Indian competition is a lakh costlier.

The reason why they are cheap however, is much more complicated. The turning point of the Thai tractor export story came in January 2013 when India signed a free trade agreement with Thailand allowing tractors to be imported to India at 0% import duty. Indian tractor manufacturers meanwhile have to contend with a 10-12% excise duty for most of their components. The counter vailing duty (CVD), which could have levelled the playing field, has become inconsequential because the excise duty for a completed tractor is 0%. “And hence the CVD applicable on Thai tractors is also 0%,” said a tax expert.

While Express first highlighted the issue in February this year, Indian manufacturers say that there has been no change in the duty structure until now. “However, we hope that the implementation of the GST would bring with it a solution. But that is only a maybe. There has been no change in the disadvantageous duty structure meanwhile,” admitted Chandramohan.

The overall market continues to fall. The domestic market witnessed a fall of 16.4% in Q1FY15-16, after a 21.8% and 29.9% fall in Q3FY15 and Q4FY15. All while Thai imports gain on Indian competition through a 12% cost advantage.

Source:- newindianexpress.com