Punjab: Ludhiana’s bicycle companies hit bumpy patch - Hindustan Times
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Punjab: Ludhiana’s bicycle companies hit bumpy patch

ByAneesha Sareen Kumar, Ludhiana
Dec 05, 2022 12:14 PM IST

High GST on cycle parts, smaller units assembling and selling cheaper, substandard bicycles pose challenge to established companies in Punjab

Punjab’s bicycle companies that saw a 200% rise in production due to increased demand from cities during the Covid-19 pandemic has hit a rough patch post-lockdown with inflation and smaller units in the unorganised sector posing as challenges.

Bicycles being manufactured at Hero Cycles in Ludhiana, where 3,500 employees make 10,000 cycles daily. The company sold 25,000 cycles a day during the Covid-19 pandemic. (Gurpreet Singh/HT)
Bicycles being manufactured at Hero Cycles in Ludhiana, where 3,500 employees make 10,000 cycles daily. The company sold 25,000 cycles a day during the Covid-19 pandemic. (Gurpreet Singh/HT)

Punjab houses 4,000 micro to large units, comprising bicycle makers, part makers and raw material makers. Established bicycle manufacturers are, however, finding the going tough with an estimated 300 traders setting up base in Ludhiana that accounts for 90% of the country’s cycle production. These secondary sellers supply cheaper, substandard bicycles.

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The average monthly retail sales of bicycle companies have fallen by 16% in five years due to the emergence of these smaller units in Ludhiana, Jalandhar, Amritsar, Bathinda, Sangrur and Patiala. The cycle part manufacturers in the unorganised sector have started selling assembled bicycles at cheaper rates using forged bills and invoices. The substandard cycles compromise on safety but are popular because they are cheaper by 20%.

SK Rai, the managing director of Hero Cycles Limited that started operations in Ludhiana in the 1950s, says sales have dropped and it has become difficult to compete in the international market due to the non-conducive environment. “How can I invest in growth, expand on exports and compete with China when the overall environment for the local cycle industry is unhealthy? Using unfair means, the secondary sellers eat into the sales of the organised sector,” he says.

Sales on the slide

According to the All India Cycle Manufacturers Association (AICMA), 22.75 million bicycles were manufactured in the financial year 2018-19, while 19.45 million were produced in 2019-20 and 18.21 million bicycles in 2020-21. Till September this year, only 8.5 million cycles have been produced, showing the steep fall.

During the Covid period when residents in the urban areas switched to riding bicycles as gyms were closed, the sector saw a 200% growth in sales of “fancy cycles”. However, the government purchase of the traditional black bicycles during the lockdown and subsequent period was minimal. “Senior citizens, youngsters and children, everyone in the urban sector was buying bicycles in 2020 and 2021. The sale of fancy cycles has gone down now with offices and gyms opening up, but the fly-by-night operators have also increased across the country,” says KB Thakur, the AICMA secretary general.

Ankur Tandon, an employee with an insurance firm at Sarabha Nagar in Ludhiana, says he bought a mountain bike worth 18,000 in 2020. “During the lockdown, gyms were closed so I took to cycling. When offices opened, the enthusiasm waned. In this chaotic traffic of Ludhiana where almost every road is dug up, I can’t think of cycling to work,” he says.

Taking the shortcut

The unorganised sector units assemble bicycles and even sell them as kits at cheaper rates, using fake invoices. They were earlier spare part manufacturers who saw an opportunity in putting together children’s bicycles and later fancy cycles called roadsters for city roads. Thakur says the spare part market witnessed a slump during the lockdown which is when the traders took to assembling cycle parts and labelled themselves as manufacturers. “Besides manufacturers of cycle parts, dealers made a fast buck by selling these non-branded bicycles at cheaper rates,” he says.

“Parents think children’s bicycles will be of use only for a year or two so they are willing to compromise on quality. It’s here that these smaller units got encouragement. Paint used in children’s bicycles is supposed to be lead free but these makers use substandard paint, plastic and rubber,” says Rai.

Harpreet Kalra, a resident of Haibowal in Ludhiana, says, “When our seven-year-old son asked for a bicycle two years ago, we were on a tight budget due to salary cuts so instead of spending 7,500 on a branded bicycle, we went for one for 4,500.”

Post lockdown, the unorganised sector is flourishing with back-end feeders of substandard parts and retailers in Delhi, Mumbai and Kolkata.

These traders now assemble mountain terrain bikes (MTB) that have technologically advanced features. They compromise on material and testing and circumvent the goods and services tax (GST) through invoicing. They violate labour and factory laws as well. Safety is the casualty as their products lack quality and mandatory parts such as reflectors.

No bill, only cash

Gill Road in Ludhiana has a large number of shops selling such bicycles. While a fancy bicycle with a sports look belonging to a brand like Hero or Avon costs 6,800, the same bicycle without a brand name is available for 4,200. The only condition for getting a cycle cheap is that the bill will not be generated and the entire payment has to be made in cash.

These traders resort to under billing wherein while sending the bicycle to other states, they put the parts in a kit and generate a bill of 800 instead of 3,200 for a traditional cycle. “Instead of paying 384 as GST, they pay just 96, causing a loss to the state exchequer,” says DS Chawla, the president of the United Cycle Parts Manufacturers Association (UCPMA).

According to Onkar Singh Pahwa, the chairman and managing director of Avon Cycles, the main reason for the growth of the unorganised sector is the absence of checks. “There is no deterrent. In 2019, the central GST department raided and penalised 11 such operators. After paying the penalty, they were back to their old ways. The government has not been able to stop this practice. The industry urges both Punjab and central governments to form a special task force to act against the culprits in a time-bound manner,” says Pahwa.

When contacted, Jagdeep Saigal, the assistant commissioner sales tax, district 1, Ludhiana, said: “We will be conducting checks and taking action against dubious operators.”

China’s loss not India’s gain

China makes 85% of the world’s bicycles, while India produces 12%. Despite the labour cost going up in China post-Covid, India could not cash in on the opportunity due to higher GST and absence of government support. Bicycle manufacturing shifted to countries such as Cambodia and Malaysia. “Due to higher GST of 12%, tax evasion is common. It has been proposed that GST be reduced to 5% but the government has turned a blind eye. In the absence of government support and dip in sales, we are unable to compete globally,” Rai says.

Though gaining popularity abroad, electric bicycles, which are available from 30,000 onwards, haven’t found many takers in the domestic market. The e-cycle unit of Hero is located in 100 acres of the Dhanansu Hi Tech Valley, which has been thrown open to investors and 90% of land has already been allotted.

Cycling back in time

The origin of Ludhiana’s bicycle industry dates back to pre-partition India and has its roots in Kamalia in the then Lyallpur (now in Pakistan). Brijmohan Lall Munjal and his three brothers, Dayanand Munjal, Satyanand Munjal, and Om Prakash Munjal, arrived in Punjab post-Partition empty-handed. The brothers first started a bicycle spare parts business in Amritsar. As business was slow, they shifted to Ludhiana in the late 1940s used to supply parts to Atlas Cycles in Haryana.

In 1956, the Munjals acquired a licence from the Punjab government to set up a cycle factory named Hero Cycles, with a bank loan of about 50,000. In 1975, Hero Cycles became the largest manufacturer of bicycles in the world.

Atlas Cycles was started in a shed in Sonepat by Janki Das Kapur in 1951. The first bicycle was produced in 1952 and the company made its international debut in 1958. By 2004, the company was exporting cycles to 50 countries. Unfortunately, due to a family feud, the company shut operations in Sahibabad in Haryana on June 1, 2020, which was also World Bicycle Day. The dispute is still pending before the National Company Law Tribunal.

Other bicycle units in Ludhiana that started in the ’50s and ’60s and became big names are Avon Cycles, Bhogal Cycles, Seth Industry Corporation, SK Bikes and Vishal Cycles.

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