KARACHI, Dec 6: Contrary to the general perception it was not textile machinery but the cost of vehicles that topped the category of machinery import in terms of value over the last two years, the break-up of the import bill revealed.

The rising trend in imports of motor vehicles surpassed all items being listed in the machinery group in terms of value, even the textiles sector that received over $5 billion investment in the last four years.

The current fiscal year 2005-06 is again stretched with import bills of motor vehicles as in the last three months the total import was 89 per cent higher than the textile sector.

Textile machinery bills for three months were $191.215 million while that of motor vehicles were $361.187 million.

The auto sector has been booming for the last three years and was among the top performing sectors of the economy but its role looks negative as far as the widening trade deficit is concerned.

Machinery group is the highest user of the foreign exchange and was the main reason for the country’s widening gap in balance of payment.

The rising trend in imports of motor vehicles was noticed in 2002-03 when the import of this sector was just close to the import bills of textile machinery. In 2003-04, imports of motor vehicles reached $625.7 million while textile machinery, which increased to $597 million, still remained below the auto sector.

In the fiscal year 2004-05, imports of motor vehicles reached close to $1 billion, giving red signals to economic managers facing immense pressure to meet the growing challenge of increasing balance of payment problem.

The first three months of the current fiscal has already indicated the trend (average per month import $120 million) and it might cross the $1 billion mark by the end of the year. The country expects a trade deficit of $6 billion this year, which is just close to the import bill of machinery group the previous year ($5.8 billion in 2004-05).

The country’s highest single import bill goes to petroleum products and now motor vehicles import stands second to the top. This increase in vehicles also helps in increasing the oil bills as the consumption is growing. Imports of petroleum products increased to $1.723 billion in 2004-05 as compared to $1.401 billion in the preceding year.

The growth in imports of motor vehicles from January to September 2005 shows that the sector has gone far beyond textile machinery. In the first nine months of the calendar year 2005, the import bill of the sector reached $937 million compared to $643 million of textile machinery, showing an increase of 48 per cent.

The vital difference between the imports of the two sectors was that the textile sector increases its exports and earns much more than what it imports, while the auto sector just absorbs the hard-earned export proceeds.

The government’s policy to encourage the import of motor vehicles has been widely criticized, while the auto sector in the country accused the government of meeting demand through import substitute instead of encouraging the sector to expand its capacity. The duty structure on imported cars has been reduced to the level that imported cars have come close to the prices of locally manufactured vehicles. It gave another phenomenon that even local car manufacturers are involved in the import business.

Analysts viewed the situation alarming for the country’s trade deficit already under severe stress and the widening gap is threatening the balance of payment. They said while exports growth was not up to the desired level, the ballooning import bills in the name of machinery group should be curtailed.