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Automobile dealers’ woe amid transportation loan suspension

January 11, 2013
in Uncategorized
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VehicleImportThe import of vehicle in the country has come down by half, compared to last year, making the automobile dealers the worst hit by the Rupee shortage. The transportation loan was suspended by mid-March last year as a measure to address the Rupee crunch in the country.

According to the latest record maintained by the Road Safety and Transport Authority, a total of 4,752 vehicles were imported last year. A major pool of the vehicles imported constitutes machinery for the projects, power tiller and government vehicles. In 2011, a total of  5,565 vehicles were imported.

The report presented by the task force, that studied the Rupee crunch in the country, the total number of vehicles imported from India stood at 1,103 in 2002. The number rose to 6,893 in 2011. Of the total vehicle imported during 2002-2011, 83.4 percent were from India, resulting in a huge outflow of rupees. As a measure, vehicles loan was suspended in mid-March last year

The Secretary General of Bhutan Chamber for Commerce and Industry, Phub Tshering, said so many activities have been affected after the ban was imposed.  “The trading sector, which used to be a booming sector, has slowed down. We don’t have liquidity from the banks given as a loan and at the same time we don’t have rupee at our disposal and most of the imports are from India.”

With not much option left, most of the dealers are now diversifying their businesses.

Samden vehicle, one of the distributors of TATA vehicles in the country, used to sell about 60 vehicles, both commercial and passenger, in a month. But after the ban came into force, they can hardly sell three to four vehicles a month.

“Last year we are quite optimistic that by 2013 January, things might change but it has not happened so far,” said Samden Vehicles’ Operation Manager, Kezang.

He said they still have around 43 vehicles in stock. Kezang said they are sustaining on the little business their workshop brings about.

STCBL affected

The State Trading Corporation of Bhutan (STCBL) also shares a similar fate. To sustain, the company will now focus more on servicing and spare parts supply.

The employees in the sales department have been reduced to four from 25. Twenty one of them were transferred to other departments.

STCBL will now look into new business areas of pharmaceuticals, agricultural equipment, automatic car servicing, hardware materials and car rentals as well.

STCBL’s Managing Director, Dorji Namgay, said the present staff of about 171 will not lose their job. “On the contrary we might require a few more staff in order to meet the special requirements of the newly diversified businesses such as a pharmacist for the pharmaceuticals.”

The company had started working on diversification since May last year and during the recent board meeting Nu.66 million has been approved for the new businesses.

However, the Managing Director said, the success of these new business will still be determined by the economic situation of the country.

“There’s no rupee, no money to finance the businesses, so any new business will be hampered. Ours being completely import related business, if the 2012 like situation continues, we are doubtful about its successful take off,” said Dorji Namgay.

The company also tried selling vehicles on monthly installment payment basis since November last year. But that did not pick up due to the requirement of a secured mortgage from the customers.

As of now, STCBL still has not been able to sell 100 commercial vehicles in stock worth about Nu.120 million.

Opinion

The Chief Executive Officer of Bhutan National Bank, Kipchu Tshering, said the government should consider lifting of bans on import of commercials vehicles. He said there is going to be a major problem with many projects opening up in 2013.

[media id=392 width=320 height=260]

As per the task force report, the import of heavy earth moving equipment such as excavators, bulldozers and angle dozers has increased from four in 2002 to 331 in 2011, driven by the boom in the construction sector. Such import from India resulted into an outflow of Rs.1.38 billion for 2011 alone.

A professor with the Royal Thimphu College, Sanjeev Mehta, said looking at the immediate change in the policy to suspend transportation loan may deter other firms from investing in Bhutan.  “The industries would be thoughtful of the investing in Bhutan or having trade relationship with counterparts because there might be policy changes.”

However, he said something that is good for the economy may not be good for the some business firms. “I think we should be looking beyond the individual interest to the country’s interest…That’s the price that the individual will have to pay for the country’s growth,” said the Professor.

 

 

 

 

 

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