Union Budget 2022-23: Seamless micro-financing schemes for pedal, electric bicycles are the need of the hour
The COVID pandemic altered people’s behaviour all over the world including India, resulting in a surge in demand for pedal and electric bicycles. As a result of the increase in health, green and sustainable consciousness, people were convinced/compelled to migrate to public transportation and fitness alternatives – which led to an increase in the number of people opting for bicycles.
Interestingly, bicycles are gaining vitalness world over by the global community, policymakers and multilateral institutions due to their incredible, inherent and indefinite benefits to cyclists, cities, counties and cosmos in terms of poverty alleviation; improving school dropouts; combating asthma/obesity/diabetes; redressing carbon footprints, traffic jams and rising noise levels; apart from providing affordable means of transport for a commute to the masses.
In India, currently, 20 million bicycles are made and sold. As India prepares for this year’s Union budget, we appeal to the visionary Central Government to consider “Cycling-Push package” as a part of the Budget to transform the Indian Bicycle industry @ 2.0 level and enable it to attain Atmanirbhar Industry level.
Challenges to industry
The bicycle industry is confronted with numerous challenges like material scarcity, premium component import – dependence, lack of cutting-edge technology, a higher GST, and a lack of safe cycling networks for pedal and electric bicycles are just a few of the issues plaguing the industry.
Furthermore, due to a lack of testing and R&D facilities for Pedal and Electric Bicycles, manufacturers are compelled to send them to say Hong Kong to meet the testing requirements of the European and UK markets. As a result, the overall cost of a bicycle increases.
On the other hand, Chinese bicycles currently cost 15 percent less than Indian bicycles due to inherent advantages (such as lower capital costs, freight subsidies, and energy costs). Even the average value addition of Chinese bicycles are three times more than Indian bicycles. This has a direct impact on Indian export markets and import substitution.
China dominates the majority of supplies in high-end bicycles and premium components to Europe, the United States, Latin America, the Middle East, and Africa (LAMEA). However, COVID-19 has forced them to halt imports, and with government support and favourable policies, India can easily tap into these markets.
Per capita bicycle penetration is merely 9 percent (as against the international benchmark of 110 percent in the Netherlands). As per TERI Study, merely 50 percent substitution from 2W and 4W to bicycles within the distance of 8 Kms can bring a total annual benefit of Rs 1.8 trillion (1.6 percent of India’s annual GDP).
As per the last censes, 48 percent of the rural population walk to work for 2-10 km distance as most of them can’t afford the upfront purchase of a Bicycle. Hence, seamless micro-financing schemes for Pedal and Electric Bicycles are the need of the hour.
The Bicycle industry is fully geared up to take up the challenges and prepare for much-awaited localization through aggregate demand and a long-term contract approach to overcome scale, quality, cost, viability. It, however, definitely requires initial push supports from the Central Government.
Bicycles are evergreen, ever-evolving and ever wondering products with promising future demands and hence a paradigm shift in the manufacturing class among scale is the dire need of the industry. Therefore, a one-time package to the Indian bicycle sector would enable the sector to register revolutionary growth (instead of prevailing evolutionary growth) and embark @ 2.0 level of hi – end bicycle era. This would eventually make India truly Atmanirbhar in premium Bicycles and E-bicycles. The package inter-alia includes the components.
A.PLI, FAME-II& testing and R&D world-class /scale Bicycle manufacturing
The manufacturing goal as per KPMG report is to position the Indian Bicycle sector @ 2.0 level while achieving 3x growth by 2030 (i.e., $3.51 billion) in high value-added bicycles – premium pedal and electric.
Apart from generating employment @ 3.3 per 100 bicycles in the supply chain, additional Govt revenue and stimulating boom in allied services. In order to realise this goal, the industry seeks:
- Localization of around 25 critical imported parts (mechanical and electrical) having world-class quality and competitive cost for import substitution, exports and the domestic market is a prerequisite. For this, transfer of state-of-the-art process and product technologies are a must and hence for bridging the viability–gap, PLI support is necessitated under DPIIT.
- FAME-II: Inclusion of E- Bicycle in FAME -II scheme of Department of Heavy Industry, GOI for faster adoption of E-Bicycle to augment in lowering the cost, creation of demand and pushing Global E-Bicycle Supply chain.
- Common testing and R&D facilities
- Setting up of an advanced cycle technology centre in Ludhiana (like ARAI Pune for automobile ) with funds from Ministry of MSME schemes is needed to complement R, D &D; testing and certification; capacity building; incubation /start-ups; and so on.
Rationalise GST to 5% with IT
Locally, the government should consider lowering the GST from the current 12 percent, especially on low-cost bicycles. Lowering it to 5 percent with ITC could make them more affordable to a wider range of consumers, particularly for the rural and urban poor base, where demand has slowed in recent months. Increasing bicycle usage through policy initiatives such as GST rationalisation for socio-economic benefits will boost micro-mobility, small earnings and ease of life to the underprivileged class.
The author is Chairman and Managing Director, HMC, a Hero Motors Company. Views are personal.