Import ban on vehicles/heavy equipment
While neither the government nor the central bank provided any clues on the vehicle ban, vehicle importers in the capital met again at the Bhutan Chamber of Commerce and Industry (BCCI) conference hall yesterday to discuss serious on-going issues caused by the Indian Rupee (INR) shortfall followed by the liquidity crisis and the import ban.
Members at the meeting expressed severe impact on respective businesses in the aftermath of the import ban and non-availability of loans with commercial banks. Owing to a sharp increase in overhead costs and less turnover, many have already initiated retrenchment and cost cutting measures while some are on the verge of closing shop.
However, the liquidity crisis according to bankers is likely to prevail for the next few years while there is no plan as yet to lift the import ban.
Ugyen Tshechup Dorji of Zimdra Automobiles, who is also the president of the Construction Association of Bhutan (CAB), said central bank officials revealed that the import ban may not be lifted for another year.
He said the companies could have managed its operational costs for a few months by utilizing its reserves even with zero growth but is not possible now as reserves are almost exhausted. “It’s been almost eight months and they are saying it will take another year. We are retrenching people and a lot of people are being transferred to other places.”
General Manager of Ugen Earthmovers, Kash Chhetri said 15 employees from her company are being laid off and the company’s branch in Gelephu has been shut down. “We thought the situation would improve but we have been running on losses,” she said.
She said while stocks worth millions are lying unsold, there are cases where sold products have been returned as the customers couldn’t mobilize funds from the banks. “We had to accept it back at last.”
She said her company has already started defaulting on loans with the banks and she feels like the situation will continue.
Ugyen Tshechup also reiterated on his earlier request that the government provide a time frame on the ban which was imposed as an interim measure. “We said we understand the problem of the government and the need to ban imports and loans but we don’t want to work in a vacuum, we wanted to know a definite time line which they (government) didn’t provide.”
The government and the RMA had taken immediate interim measures by banning import of unessential commodities, housing and vehicle loans, in March this year as it was perceived that excessive credit had fueled the INR shortfall.
Car dealers were hopeful again when the government later resolved to impose an additional 20% green tax on vehicles above 1,800 cc and 5% tax on vehicles below 1,800cc during the last parliamentary session.
However, importers at the meeting yesterday vented that the tax policy doesn’t serve any purpose with zero imports and the ban still in place.
Palden Tshering of Chundu enterprises said a lot of investments made are turning out to be going astray. “Showrooms were part of the required set-up. Likewise we have made huge investments while setting up and we need to know how to pay back the loans with banks,” Palden said.
Some others said it’s already posing to be a liability as a major source of investment money included bank loans for which dealers are currently making monthly payments.
Almost all importers at the meet cited various other issues such as mounting pressure from foreign partner companies with regard to business performance and even more pressure from commercial banks with regard to loan re-payment.
Car dealers said the government and BCCI must intervene because the central bank is adamant and worried only about deficits and not about the repercussions of the liquidity crisis and import bans.
The meeting concluded with all the importers resolving to submit all the details including figures with regard to the impact of the import ban and credit issue till date.
Importers, within a week’s time will put forward to the chamber, figures related to losses incurred, retrenchment, tax payments made, outstanding liabilities such as loans with commercial banks among others which BCCI will then take up with the government.