ISLAMABAD: The policy of import compression by the government to manage the balance of payments which was implemented in May 2022 has restricted the automotive sector’s operating capacity to 35 percent of its total capacity which has resulted in the escalation of prices because of fixed operational and technical costs.
The secretary Industries stated this in the briefing to the Public Accounts Committee (PAC) on Tuesday. The committee met under Chairman Noor Alam Khan.
The committee recommended the government to revisit the existing auto policy and give additional consumer protection by implementing safety standards and overcharging, auto delivery within one month, tariff rationalisation on commercial import of used cars, full capacity utilisation etc within one month.
The Ministry of Industries and Production gave a comprehensive briefing on the delay in the delivery of cars followed by another briefing on the import of auto parts by the Ministry of Commerce, and the Federal Board of Revenue (FBR) gave a briefing on taxes on CKD, CBU, and the commercial import of vehicles.
In a ruling, the PAC chairman said that in the documents the word car manufacturers would be replaced with car assemblers as they failed to localise their models as per the auto-dilation programme.
It was stated in the briefing that the ministry is considering various options for streamlining the delivery of cars. These proposals are shifting to wholesale retail mechanism for sales through dealership.
Restricting booking beyond 2-3 month time and the safety regulations encompassing brakes, lights, seats, seatbelts, tyres, anti-theft, airbags etc have been included for mandatory compliance through inclusion in relevant SRO monitoring vehicle manufacturing.
The secretary further revealed that for late deliveries as per government policy, consumers were refunded Rs1.9 billion from November 2021 to April 2022.
Members committee expressed their displeasure over the delay in the delivery of cars and overcharging despite depositing 100 percent payment and car assemblers are running 50 percent of their installed capacity which is encouraging own money on the new cars.
The secretary Industries briefed that the installed capacity of auto companies to produce vehicles is 500,600 against the annual demand of 300,000 units.
In the fiscal year 2021-22, 322,754 units were sold as compared with 2020-21 when 27,592 units were sold. It was also stated that after facing a contraction in sales due to Covid-19 in the year 2019-20, sales volumes have gradually increased, however, economic slowdown, increase in interest rates, and tightening of financing requirements by the State Bank of Pakistan (SBP) have adversely impacted car sales.
He recommended the government to ease regulatory duties on the commercial import of used cars and also reduce the age limit from three years to five years on up to 1,300cc cars.
The committee further directed to deliver those who booked car against 100 percent without extra charges and also enhance capacity to discourage own.
Asim Ahmad (the current chairman) briefed the committee members about the rate of regulatory duties, federal excise duties, and other taxes on the import stage of CKDs and CBU.
He said that Rs 431 billion was received during the fiscal year 2020-21 and Rs 787 billion in the fiscal year 2021-22. In the current fiscal year till October 12, 2022, an amount of Rs 46 billion was collected.
Copyright Business Recorder, 2022
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