KARACHI, Sept 25: In what is seen a rare show of political unity, members of both the treasury and the opposition benches in the National Assembly started thumping loudly when Sardar Tufail Ahmed, a back bencher with the ruling party, asked Industries and Production Minister Liaquat Jatoi a straight question on the floor of the house. “How many cars were quickly delivered to your family and friends on your recommendation as the minister of industries?,” he shot, to which, a visibly embarrassed Mr Jatoi replied: “I am willing to resign here and now if someone can prove that I am minting money. Ask the NAB or RAB to double check.” With this fiery exchange, what came out into the open was the simmering discontent against Liaquat Jatoi’s handling of a problem that has assumed alarming proportions and one in which the biggest loser is the hapless public.

Analysts will happily tell you that the best investment to make these days is to book a car with one of the leading automobile makers in the country. On an investment of Rs1.2 million over a period of 7 months, investors are able to earn a “profit” of Rs125,000, which equates to over nine per cent. This return is expected to go up further in the next few months as investors have flooded the automobile market, creating an artificial shortage under which genuine car buyers have to pay a premium ranging from 10 to 30 per cent of the official car price if they want immediate delivery.

While the demand for cars has gone up with the lowering of interest rates and sweet-heart deals offered by banks and finance companies, the problem is not with the hike in demand but more with the spiking of the supply, say analysts. “All things equal, the local car producers are making enough automobiles to meet the rise in demand for cars,” says an automobile producer. Then what is the problem? It is an unregulated market in which the government has absolved itself of any responsibility on the pretext of free market economics with the result that an artificial shortage of automobiles has been created. And the problem continues getting worse. Premiums on local cars have gone through the roof. On last count, a buyer would have to pay over Rs200,000 extra to get a Toyota Corolla. In the case of the Suzuki Baleno premium has risen to nearly Rs100,000, after Pak- Suzuki Motors stopped bookings of new cars in September for an indefinite period in a bid to clear their backlog.

For its part, the government has set up a task force to look into the problem. This body comprises bureaucrats. There is not a single member from the private sector or from amongst any consumer group or business association. The task force has asked automobile makers to furnish information like car costs, delivery schedules, and even information on premiums charged by dealers on cars.

In August 2002, the then Industries Minister Razak Dawood announced that the government had made it mandatory that registration of cars be made in the name of the person who booked the car and that this could not be transferable for six months. This one move would have discouraged speculators. In reality, this was not done. Again, in February 2003, Industries Minister Liaquat Jatoi made the same commitment. It was not honoured and no such restriction was placed. In April, a minimal price reduction was announced by two car makers. But the fact that buyers had to pay premiums for delivery of cars made these reductions farce.

In December 2002, Mr Jatoi said that he had asked car makers to reintroduce the old system whereby the company had to pay a mark-up to the booking consumer if it was not able to deliver the vehicle for even two months. This has not been followed up. The task force is expected to submit its recommendations to the government by the end of September. One wonders what these would be and whether, if at all, they would be implemented.

Car makers in Pakistan have never had it so good. According to the Pakistan Automobile Manufacturers Association (PAMA), car production rose by 60 per cent in August 2003 as compared to the same period in 2002. In 2002, overall car production rose 29 per cent while in the nine months of 2003, this has risen by 40 per cent.

Most car makers have also promised to raise further but are wary of the artificial bubble that has been created by speculators and are reluctant to over-commit themselves. The automobile industry in Pakistan is heavily protected. According to the State Bank of Pakistan, the gains of the automobile industry come on the back of protective policies that ultimately result in higher consumer prices. The SBP, in its quarterly report, commented that car makers benefited from a strong rupee and lower interest rates but did not pass this on to consumers.

Car makers say that the menace of premiums is one that can be tackled with government initiative. Indus Motors Co (IMC), makers of Toyota, say that they have already blacklisted one dealer and are introducing a scheme to give priority to those who voluntarily ask for cars to be registered in their names. The IMC chairman told the press the other day that the speculators bubble would collapse if the excise department were asked to register cars in the name of the person who booked it and in whose name the car had been released by the auto maker. He advised the general public to refuse to pay a premium.

Part of the problem, say car finance executives, is the fact that many car makers oblige government officials as well as entertain large government orders on a priority. There have been instances where delivery dates have been pushed back on this account, much to the frustration of individual buyers.

Keeping all this in mind, the All Pakistan Motor Dealers Association has said that the best way to bring down car prices would be to allow the import of reconditioned cars. H.M. Shehzad, the chairman of the association, says that this can be a temporary measure that will help reduce the pressure on local car prices. This is an argument that is gaining favour in Islamabad.

Mr Liaquat Jatoi says that this will not only affect investment in the car industry, but also render many people employed in the local vendor industry jobless. Be that as it may, the fact is that nothing is being done to solve the problem of unrealistically high local car prices. Whoever the beneficiaries, the fact remains that the hapless Pakistani car buyer has to suffer as a consequence of this charade.