ISLAMABAD: The Senate Standing Committee on Ind­us­­tries and Production on Tuesday decried the Federal Board of Revenue (FBR) for not considering the fallout of cheap auto spare parts imports.

Briefing the committee meeting, which was chaired by Senator Ahmed Ali, representatives of Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) said the lopsided government policies were discouraging local light engineering sector.

“We are making spare parts and accessories for cars and each part has to clear quality testing from Japan. However, we should consider the fact that parts made by us are not available in the local markets,” said Amir Allahwala, a senior member of Papaam.

He blamed ambiguities in the import regime as a reason. Commercial spare parts are imported at low duties by under-invoicing, while a large number of spare parts are imported as scrap metals and the duties are levied on them by weight, he explained. “But on the other hand we pay up to 33 per cent duties and taxes. Either the government should reduce duties on locally manufactured parts or raise duties on the imported parts,” he added.

Spare parts manufacturers point out large duty differentials with importers

The Paapam members said there are around 19pc duties on tractor parts, and at the same time the total duties on a tractor were 5pc as government wants to support the agriculture sector.

Senators Ahmed Khan and Sitara Ayaz asked about used spare parts usually referred as ‘Kabuli’, they were informed that most of these parts were imported from vehicles discarded in the Middle East or in India which land in Pakistan after being imported via the Afghan Transit Trade. Up to 65pc of cars and 96pc parts for motorcycles were manufactured in the country.

Eight new carmakers have already entered the Pakistani market with an investment of $1.5 billion. New plants have been established to manufacture glasses and windscreens of vehicles and another plant to make alloy wheels was being set up in the country.

When Ali asked about solutions to prevent dealers from charging premium, the representatives of car makers said that there was a flaw in government policies related to local cars.

They added that there was no wholesale chain in the sector. Each dealer should maintain an inventory of cars and the customer can make a choice as it is done for imported cars, but the auto companies have to maintain the details of retail sales too in Pakistan.

The issues related to import of spare parts and high duties on locals parts will be taken up with the FBR, the committee concluded.

Published in Dawn, January 23rd, 2019