Ellora Time's Manufacturing Woes

In case of imports, the goods were under-invoiced and thus saved a substantial amount by evading custom and excise duties. In addition, the importer did not have to pay central sales tax and local taxes. These calculators were sold in the grey market. Eventually, the cost of such calculators worked out 30-40% cheaper than of those manufactured by organized sector players like Orpat. The problems were further compounded when imports came in via Nepal. Under the South Asian Association for Regional Cooperation (SAARC) Rupee Trade Area (RTA) arrangement, India allowed imports from Nepal at concessional duty rates. Chinese companies began to use this low duty facility by routing their goods through Nepal. The problem aggravated because it was difficult to monitor the country of origin of the goods most of the times.

According to the Indian regulatory setup, while spare part imports were charged a duty of 5%, raw material imports are charged a duty of 25%. Thus, it did not make sense for manufacturers like Ellora to import raw material at all. Therefore, Ellora began to import parts from China, assemble them at its Morbi plant and sell them. It stopped purchasing raw material from the local market, which resulted in many transporters, drivers and cleaners losing their jobs. While a few years ago, Ellora employed around 15,000 workers, by early 2001, the company had onl about 5,000 employees.