The government suffered a loss of over Rs 14 billion in the past 12 months in the shape of custom duty by allowing import of used cars under special regime (SRO 577), as over 50,000 vehicles have been shipped into Pakistan during this period, according to calculations made by stakeholders here. Besides this, the automotive parts vending industry has lost an estimated Rs 20 billion in sales, as expected jump in sale of locally assembled new cars was hindered by the arrival of used cars, they said.
Whereas a locally made car besides involving the whole economy, acquires parts from local vendors valued up to Rs 300,000-400,000 per car, the imported 50,000 vehicles have deprived local vendors of this business. Stakeholders said, government of Pakistan, it seems, is inclined to turn the country into junkyard of used vehicles at the cost of indigenous auto industry, which is providing jobs to hundreds of thousands of skilled and unskilled workers. During June 2012 approximately 8,000 used vehicles were imported while the number in July 2012 might be 9000. It amounts to 30 percent of the total market demand for automobiles in the country which is causing an annual loss of Rs 20 billion sales to the automotive vending industry.
By giving the customs department discretion, to further reduce applicable duties up to 60 percent depreciation, the government has literally allowed imports of used cars free into Pakistan. With double-digit interest rates, unprecedented exchange rate depreciation and unavailability of gas and electricity, the government must intervene to ensure that local engineering units do not shut down.
Resultantly, foreign exchange will have to be wasted on import of spare parts for these used vehicles, which will also cause a loss to the exchequer to the tune of $50 million every year, it is estimated. Instead of containing the cost of doing business, blame game is on. The hike in electricity rates to the tune of 120 percent in the last two years and prolonged loadshedding of energy sources has propelled the prices of all inputs to highest level.
Instead of giving attention to the core issue of curtailing inflationary trend engulfing resources and endangering national integrity, the government is allowing import of each and every thing into Pakistan to jeopardise local industry. It may be noted that foreign exchange consumed in import of used car is double that of CKD kit imported for local manufacturing due to substantial local content.
Hundreds of components such as wheel rims, tyres, batteries, radiators, mufflers, wire harness, instrument panels, steering wheels, air conditioners, sun visors, other sheet metal parts and plastic parts, which are produced by local vendors, will now be imported. The vendors are directly providing jobs to almost 200,000 skilled workers (plus over 2 million indirect workforce) who feared losing jobs if imports of used vehicles are continued in high numbers.
The situation is getting out of control as allowing large variants of models coming into Pakistan would surely also entail huge expenditure of foreign exchange on spare parts imports. The worst part is that every vehicle imported is also a lost opportunity for our economy to create employment. We are estimating a loss of over 30,000 jobs in the vendor industry, stakeholders claimed.
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