LAHORE - Pakistan Association of Automotive Parts Accessories Manufacturers (Paapam) has lamented that payments for importing used cars are made through illegal channels commonly known as ‘Hawala’ in the market which makes it difficult for State Bank to even track this money laundering.
In a statement, PAAPAM Chairman Syed Nabeel Hashmi, showing his grave concern over the huge decline of 46 per cent in auto sales in July, said that it is just due to mounting pressure from imports. He said that imports rose by 25 per cent to 4,950 units in July and catered to 32 per cent of the overall demand in the country.
He added that share of imports jumped to 23 per cent in FY12 from 11 per cent of FY11. He said that the mostly luxury cars are being imported under the used cars import facility which is depriving the government of valuable foreign exchange.
“The government definitely has all the information in this regard and should have reprimanded the dealers who had earlier assured that the prices of used cars would be much lower so that ordinary consumers would benefit from the facility.
Allowing commercial import of used vehicles is not only unfair to the unfortunate consumer but is also detrimental to the local auto industry,” observed Hashmi.
He said that the government suffered a loss of over Rs14 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. Besides, the automotive parts vending industry has lost an estimated Rs 7 billion in sales, he said.
Whereas a locally made car besides involving the whole economy, acquires parts from local vendors valued up to Rs300,000-400,000 per car, the imported 50,000 vehicles have deprived local vendors of this business, he added.
PAAPAM Vice Chairman Munir Bana said that the government, it seems, is inclined to turn the country into junkyard of used vehicles at the cost of indigenous auto industry.PAAPAM managing committee’s senior member Usman Malik said that giving 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. He said that Federal Board of Revenue (FBR) has not revised the duty structure on import of used cars for the last six years, as the taxes paid at import stage are fixed in US dollar which were determined in 2006.
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.
On rising prices of locally assembled cars, Usman Malik said that the best way of reducing car prices is to increase level of localisation. He emphasised government to implement Auto Industry Development Programme (AIDP) in letter and spirit to achieve the benefits of cost reduction.