Racketeers are allegedly responsible for exporting approximately 5–15% of the total CE sold in India to various Middle Eastern and African countries, where it is sold for hefty profits. This not only puts financiers at risk, as they may be unable to repossess the asset if an account becomes non-performing, but it also distorts the global export markets for original equipment manufacturers (OEMs) operating in India.
26 Apr 2023 | 4233 Views | By Shahkar Abidi
CASE Construction Equipment (India), a key player in the global farm and construction equipment industry and a subsidiary of CNH Industrial has implemented a comprehensive four-tier system to prevent the unlawful export of construction equipment from India.
The new control system investigates whether customers are paying the full GST ...
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CASE Construction Equipment (India), a key player in the global farm and construction equipment industry and a subsidiary of CNH Industrial has implemented a comprehensive four-tier system to prevent the unlawful export of construction equipment from India.
The new control system investigates whether customers are paying the full GST rate of approximately 18% or the reduced rate of 0.1% GST, which is meant for merchant exporters. Any indication of the latter raises suspicion that the machine may be intended for export, as the customer may be attempting to reduce cash outflows. For the sake of brevity, the 0.1% charge for merchant exporters is a legal provision under Indian laws, requiring the purchaser to export such machines within 90 days of the issue of the tax invoice.
In addition, once a machine is purchased, the company monitors its transportation and destination. If it is transported to the western Indian port of Nhava Sheva, there is a high likelihood that it will be exported to countries across the Middle East, Africa, and Southeast Asia. Another matter is that a purchaser can always get a machine delivered to another location and then ship it to the nearest port for export.
Furthermore, another major red flag is whether or not the purchased machine has been commissioned, along with whether the warranties are being used. Explaining the company's methodology, Shalabh Chaturvedi, General Manager of CASE Construction Equipment (India), stated that if all four checks are completed successfully, one can be confident that the equipment is being used in India. This system presents CASE's efforts to combat the pervasive problem of illegal construction equipment exports in the industry.
An exclusive report by Autocar Professional published in November last year shed light on the concerning issue of illegal exports of construction equipment (CE) from India. According to the report, racketeers are allegedly responsible for exporting approximately 5–15% of the total CE sold in India to various Middle Eastern and African countries, where it is sold for hefty profits. This not only puts financiers at risk, as they may be unable to repossess the asset if an account becomes non-performing, but it also distorts the global export markets for original equipment manufacturers (OEMs) operating in India. As such, the industry association has taken up the matter with the Indian Center for immediate intervention to address the issue. It is important to note that OEMs sold about 1 lakh units of CE during the fiscal year 2023, representing an annual growth rate of about 25%. This highlights the scale of the problem and the need for effective measures to combat illegal exports in the industry.
It all began with Ukraine-Russia conflict
The ongoing conflict between Russia and Ukraine that began in February 2022 has led to a significant shift in the construction equipment (CE) market in Russia. Western companies, including CNH Industrial, have pulled out of the lucrative Russian market due to the instability caused by the war, resulting in an imbalance between supply and demand. As a result, CE makers from China have benefited, taking over the entire Russian market with over 90% of new CE products now bearing Chinese footprints. Such developments present concerns about the future of the CE industry in Russia, with the dominance of Chinese CE makers likely to continue in the foreseeable future, the experts opine. They also say that while multinational giants with established product distribution channels can export construction equipment (CE) to markets in Africa, the Middle East, and Southeast Asia, some Indian companies that have traditionally focused on the domestic market are now looking to take advantage of the current situation to make some extra money. "That's what's bridging the gap there," noted Chaturvedi.
CASE offers a full line of construction equipment globally, including motor graders, wheel loaders, vibratory compaction rollers, crawler dozers, skid steers, compact track loaders, and rough-terrain forklifts. It recently displayed its Made-in-India product proficiency at the brand’s state-of-the-art manufacturing facility in Pithampur, where it launched the 770 NXe Loader Backhoe along with the 770EX Tractor Backhoe Loader; 1107FX and 952 Vibratory Compactors, 1650 Dozer, and 865 Grader, along with the CX220LC Crawler Excavator.