The Hindu Business Line : Battery industry hopes for early cut in lead import duty

DISTURBED by the Free Trade Agreement (FTA) initialled by India with Thailand and the recent withdrawal of anti-dumping duty on lead-acid batteries from Bangladesh, the domestic battery industry is now expecting an early reduction in import duty on lead.

India charges 20 per cent import duty on lead as against five per cent in Bangladesh and nil in Thailand. Lead constitutes 70 per cent of the total cost of battery production.

Talking to Business Line here recently, Mr. S B. Ganguly, Chairman of Exide Industries, said that in a recent discussion with the industry the Union Government has hinted that it would consider a cut in duties to the level of the neighbouring countries.

"We are following up the import duty issue closely," he said. The dialogue had taken place particularly in the context of a likely negative impact of FTA on the battery industry.

Apprehending inclusion of batteries in the list of duty free imports from Thailand in the foreseeable future, Exide had already announced its intention of outsourcing batteries from Thailand in the long run unless the Centre drastically reduces the import duty.

"Unless the duty anomaly is removed, there is absolutely no case for manufacturing batteries here in a free-trade environment," Mr Ganguly observed.

While battery imports from Thailand have not yet started, as it is not in the Early Harvest Scheme, the Exide Chairman is anticipating a spurt in cheap imports from Bangladesh following the recent withdrawal of anti-dumping duty.

"Bangladesh has a fairly large capacity compared to its domestic demand. While it already has an edge over Indian battery producers owing to lower import duty on lead, the excess capacity was dumped into India," he recounts.

Given the lead role played industry in the anti-dumping campaign in 2001, Mr Ganguly believes that the "withdrawal of anti-dumping duty may not augur well for the domestic industry."

Interestingly, rating agencies are already keeping a close watch on the dumping issue and a probable negative impact of FTA with Thailand.

"We are currently evaluating these issues. While it is difficult to quantify the negative impact of the withdrawal of anti-dumping duty, we are certain that there is a risk perception for the domestic battery manufacturers," said an ICRA spokesperson.

The agency believes that the extent of competitive pressure on account of discontinuance of anti-dumping duties and inclusion of lead acid batteries in the FTA would be a key "rating sensitivity" for the battery sector in the future.

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