KARACHI: The arrival of completely knocked down (CKD) kits fell to $119 million in July-August from $236m in the same period a year ago.

Quoting the State Bank of Pakistan’s data, an assembler attributed this decline to restrictions imposed by the central bank on May 19 to curb imports of auto parts.

However, the import of kits showed a slight recovery to $66m in August from $52m in July. An assembler said this paltry increase was because the SBP decided to issue a quota of 50pc from July onwards.

He said auto parts imports may remain low in September, thus maintaining a big drop in July-September compared to the same period last fiscal year as imports are still not fully allowed.

Assemblers lament parts shortage hurting production

However, as per an understanding reached between the assemblers, SBP, and the ministries of finance and industry, the central bank is releasing foreign exchange at 50pc of their average imports over the last four months from July which helped in clearing consignments from the port.

As per a note of Topline Securities on Sept 13, the quota has increased to 60pc for August and 70pc for September.

In contrast, the figures of the Pakistan Bureau of Statistics (PBS) also revealed an improvement in kits’ imports to $99m in August from $68m in July.

A drastic decline of 35pc was witnessed in the arrival of kits to $166m in July-August from $256mn in the same period last fiscal, PBS figures stated.

Auto assemblers had to undertake non-production days after May 20 onwards due to restrictions imposed by the SBP through which the bank introduced a mechanism of prior approval from SBP for the import of a few goods including CKDs.

Assemblers said that the decision had been causing a delay in payments to foreign suppliers thus creating huge business risk for local industry. The amount of weekly foreign payments was around $30m.

“These restrictions have so far delayed the foreign payments of about $25m resulting in loss of investor’s confidence in the Pakistani market, and any further delays in the approvals by SBP would result in the loss of $80m contribution to the exchequer,’’ they said.

Pakistan Automotive Manufacturers Association (PAMA) and Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) had informed SBP Governor Jameel Ahmed on Sept 13 that this understanding was not available to automotive vendors and their consignments were stuck up at the port, hindering local production. A quota of $8.59m was allocated to vendors from September instead of July resulting in a shortage of parts.

They demanded the SBP governor to allocate a quota to auto parts manufacturers from July instead of September to synchronise their supplies with the assemblers so that vehicles could be assembled on the availability of both locally made and imported components.

They said development activities for various new models are in the process across the industry. For new technology vehicles and parts development, the assemblers and vendors need to import machinery, molds, tools and fixtures. For the smooth development of local parts, the trial activities are to be conducted months before the start of mass production.

They urged the SBP to allocate a minimum quota of $13m per month for the bare minimum working of all auto sector segments.

Published in Dawn, October 2nd, 2022

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