ECONOMYNEXT – The capacity of radial tires has been increased by 16% to 600,000 per year to meet the high demand, said Sri Lanka-based CEAT Kelani Holdings, as import controls were lifted as the money printing created currency shortages.
The addition of two tire presses and a tire making machine will increase the production capacity of an additional 84,000 tires from the current 516,000 units.
The ability “will ease supply pressure attributed to government restrictions on importing certain sizes to retain foreign currency,” the company said.
Sri Lanka’s central bank has printed large volumes of money defending various interest rates, including a yield on 12-month bills, creating currency shortages when newly created liquidity is intended to be repaid in the markets. foreign exchange.
Instead of stopping liquidity, the authorities have imposed controls, sometimes supported by cronyism companies known as import substations which are not competitive enough to export but exploit domestic consumers with “black market” prices. »Under cover of import duties.
However, CEAT is competitive on the export market.
With new capacity commissioned earlier this year, capacity is already up 30% this year, CEAT Kelani said.
Commenting on this latest extension,
“The CEAT brand supplied almost half of Sri Lanka’s tire needs for several years before the pandemic,” CEAT Kelani chief executive Ravi Dadlani said in a statement.
“The disruption of global transportation logistics due to the pandemic, combined with temporary import restrictions on certain categories and sizes of tires, has forced us to step up production to help fill the domestic deficit.
Now the monthly output was around 50,000.
The expansion will meet demand from Suzuki Alto, Maruti Suzuki Alto, Maruti Suzuki Omni, Tata Ace Ex2, Hyundai-Eon, Mitsubishi Minicab, Toyota HiAce, Nissan Vanette, Lanka Ashok Leyland Dost, Tata Winger, Nissan Urvan, Kia K2500, Suzuki-Super Carry, Maruti Suzuki, Super Carry, Piaggio Porter, Toyota Town Ace, Toyota Lite Ace, SuzukiWagon R, Daihatsu Mira ES, Nissan Dayz, Nissan Note, Honda Freed and Toyota Avanza, the firm said.
CEAT Kelani increased tires for two-wheelers by 85% between June and September 2020. The production of tires for motorcycles and scooters increased from 27,000 to 41,000 units between July and August 2020 and 50,000 from September.
Repeating the mercantilism peddled by the authorities, CEAT said it has potentially saved “11 billion rupees in Sri Lanka per year in foreign currency”.
However, Sri Lanka’s currency problems had worsened amid the cash injections. Credits financed by cash injections poured into the areas, pushing imports back to 1.7 billion rupees in March.
Meanwhile, a parallel market for currencies had also developed to around US $ 230 from around June, as tire production went into operation.
In Sri Lanka, there is a strong mercantilist belief that monetary instability is linked to trade and not to monetary peg or credit. Sri Lanka has suffered from currency shortages and import controls since the establishment of a Latin American-style central bank in 1950.
Imports of tires are controlled under an Import Control Law enacted in 1969, when foreign exchange reserves fell to US $ 40 million, compared to US $ 190 million when a currency board (rate of fixed exchange or rigid anchor) has been abolished to create an unstable flexible anchor. (Colombo / July 12/2021)