Used cars running over exchequer

The government has suffered a loss of over Rs10 billion in the past six months in the shape of loss of Custom Duty by allowing import of used cars under special regime as over 35,000 vehicles have been shipped into Pakistan during last 12 months. Besides, the automotive parts vending industry has lost an estimated Rs25-27 billion in sales, as expected jump in sale of locally assembled new cars was hindered by the arrival of used cars. This was observed by the Chairman of Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) and Business Forum of Punjab in a meeting held here on Friday to discuss the repercussions of unbridled dumping of used cars in the country. He said the local production of cars and LCV’s have registered a massive reduction of 22000-25000 owing to import of used cars in huge volumes, also hurting the domestic auto parts vending industry by a massive amount of Rs27 billion. He said that giving the Customs Department discretion, to further reduce applicable duties by up to 60 per cent depreciation, 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, he said. Now precious 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 only in one year, he estimated. 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 jeopardize local industry, he said. “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,” he said. He said that the vendors were directly providing jobs to almost 200,000 skilled workers (plus over 2 million indirect work force),who feared losing jobs if imports of used vehicles are continued in high numbers.
Munir K. Bana, Vice Chairman of PAAPAM, added that the situation was 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. He said that 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 that could have been created, he pointed out.
On rising prices of locally assembled cars, Mr. Bana said that the best way of reducing car prices is to increase level of localization. He emphasized to the government to implement Auto Industry Development Program (AIDP) in letter and spirit to achieve the benefits of cost reduction.