ISLAMABAD: The auto sector on Monday urged the government to cut duties on raw materials and parts in the next budget so that prices of locally manufactured and assembled vehicles could be decreased and production be increased.

In its budget proposals forwarded to relevant ministries, the Pakistan Automotive Manufacturers Association (Pama) suggested the government change the tax structure on raw material and parts to bring down the cost of vehicles. Pama further said that manufacturers were no longer able to absorb the unprecedented surge in raw material prices globally.

According to the association, most automobiles today are composed of 57 per cent steel, 7pc iron, 8pc plastic and 8pc aluminium while other materials accounted for the remaining 20pc.

“The prices of all these materials are constantly surging this year and it has become really difficult for automakers all over the world to absorb the impact. Hence, makers are forced to increase the prices of their manufactured cars,” Pama added.

According to the association, in steel sector the per tonne price of electro galvanised coil, cold rolled coil and hot rolled coil has increased by 118pc, 119pc and 161pc, respectively, as compared to the rates recorded in September 2020.

Similarly, the price of copper per lb was recorded $2.95 in September 2020 but the same was priced at $4.66 in May 2021 — a jump of 58pc. Besides, per tonne price of aluminum increased by 45pc in the same period, Pama added.

Keeping in view the rising prices of raw material, the auto industry suggested the government to change the SRO 1178 (I) 2015 which is regarding the Additional Custom Duty (ACD) levied on various items including raw materials at 1pc which was further enhanced to 2pc vide SRO 630 (I) / 2018. Under the Automotive Development Policy 2016 (ADP) a road map of custom tariff on imports of components, sub-components CKD was outlined. Therefore, Pama claims, the enhancement of ACD is not in line with ADP. Further, the levy of ACD has badly affected the competitiveness of local automotive industry.

According to the association, the government has increased per unit taxes on automotive industry by levying FED and ACD on input materials of automotive industry. The objective of the government was to generate more revenue by raising different tax rates.

PAMA also suggests the govern­­ment to allow all direct consumable materials under SRO656 including Oils, lubricants, greases etc. SRO656(I)/2006 allowed OEMs to import direct materials at concessionary duty.

Published in Dawn, May 18th, 2021