Local tyre manufacturing companies, though have plans to start production of radial tyres of trucks and buses to meet the growing demand, find it hard to materialize their plan because of unbridled smuggling of these into Pakistan in absence of any effective measures taken by the government. The truck and bus radial tyres which are not produced in the country are either smuggled or imported into Pakistan. The government should provide a policy to encourage the local tyre manufacturers to expand their production capacity to meet the growing demand.
Industry sources told Business Recorder that they are ready to set up new plants or expand the existing ones to meet the growing demand but could not take initiative as we don't see any effective measures on the part of government to curb smuggling and under-invoicing. The local tyre manufacturing industry is in a state of perplexity regarding expansion of their plants to meet the rising demand for different kinds of tyres including passenger cars, light commercial vehicles, truck/ bus and tractor. If government ensures that it would provide protection to the local industry, we can make investment on expansion.
The local tyres industry has huge potential to grow as it is meeting only 20 percent of the total demand while 35 percent is met through legal imports. However, the major chunk i.e. 45 percent of the demand is met through smuggled tyres. The trucks, buses, and radial tyres of 11-20 sizes worth Rs 30 billion are smuggled into Pakistan annually. This is not only hitting the local industry but also depriving the exchequer of huge amount of revenue under the head of regulatory duty, withholding tax, income tax and sales tax etc.
The Afghan Trade Transit has become main source of smuggled goods into Pakistan including tyres while Taftan border between Pakistan and Iran is also being used for the purpose. Apart from smuggling, the under-invoicing and misdeclaration are also a hitting the local market. Misdeclaration of sizes and using wrong HS code has become routine practice impacting the local industry, sources said.
As many as 4.8 million tyres are imported into the country legally, sources said, and claimed that up to 70 percent under invoicing is estimated in the Chinese tyres. Master bill of landing should be made mandatory to curb the menace of under invoicing. Tractors' tyres are imported at zero rates for being important input in the agriculture sector while truck and bus tyres are imported at 30-35 percent regulatory duty. Similarly, passenger and light trucks' tyres are imported at 14-20 percent of the regulatory duty.
The world known brands of truck manufacturing companies are investing in Pakistan to exploit the emerging opportunities arising out of the CPEC project that would also encourage the vending industries for expansion. Similarly, the market is expected to witness great demand for tyres. The local tyre manufacturers who are eager to expand their production capacity to meet the growing demand are reluctant mainly due to lack of government policy that could protect their investment.
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