Duty hike on bicycle parts imports coming

The government plans to raise customs duty on the imports of freewheel and sprockets – accessories of bicycles and rickshaws – to 15% from existing 10% in the upcoming budget for the fiscal year 2023-24 in a bid to facilitate local manufacturers, said sources from the Finance Ministry. 

The sector has huge potential to grow on the back of an ever-growing demand for bicycles both at home and abroad. Industry insiders said this backward linkage industry, if given necessary policy support, will emerge as a foreign currency earner after meeting the domestic demand.

At present, the demand for various sizes of freewheel is 35-40 lakh units and sprocket 50-55 lakh units, which are mostly imported, shows an analysis of the Bangladesh Trade and Tariff Commission (BTTC).

Recently, three bicycle parts manufacturers in the country - Aziz Cycle Industries, RFL Ltd and Siraj Cycle Industries have registered to produce freewheels and sprockets locally.

Meanwhile, Aziz Cycle has started marketing their products. The company has the capacity to produce around 30 lakh units of freewheel and 60 lakh units of sprocket alone, which is a clear indication that if the three companies go into full operation, the accessories can be exported abroad after meeting local demand.

Imports of freewheel and sprocket are currently subject to total 37% tax, including customs duty, VAT, advance income tax and advance commission. 

The Tariff Commission has proposed to the NBR to increase the customs duty to 25% from existing 10% and the total tax on imports to 58.6% from 37% after the Bangladesh Bicycle Merchant Assembling and Importers Association appealed to the commission to provide protection to the backward linkage industry.

The NBR, however, proposed to increase the custom duty to 15% from existing 10%, said sources.

Pran-RFL Ltd Director (Marketing) Kamruzzaman Kamal told The Business Standard, "There is local value addition in producing backward linkages. Since the accessories are being produced locally, it is good news for manufacturers if the government get tougher on imports, to develop the industry. It will encourage the entrepreneurs of the industry".

Analysing the duty rates on imported freewheels and sprockets, and the existing duty rates on raw material imports, the Tariff Commission found that the local value addition in producing these two accessories is about 40%-35%. 

The existing tariff on import of raw materials and machineries do not ensure adequate protection for local producers, in terms of value addition, said industry insiders.

Local manufacturing small-scale industries are falling behind in race with imported accessories due to lack of strong brand image. As a result, despite having the production capacity, local manufacturers cannot use it properly, and on the one hand, the production cost is increasing, they added.

Additional duty on imports is necessary to ensure proper development of backward linkage industry, and to make them able to compete with imported products, the Tariff Commission said in its recommendation to the NBR.