ISLAMABAD, June 15: The government did not intend to reduce the prices of local cars through the proposed duty reductions announced in the federal budget 2004-05 but wanted to overcome the problem of high premium, delays in delivery and short supplies.
Discussions with various ministers involved in formulating recommendations for the cabinet on duty reductions suggest the government has tried to improve the situation on supply side by providing an alternative in shape of imported cars so that the menace of premium is eliminated.
Since the government had no intention to reduce the prices of local cars because of revenue consideration, the duties on completely knocked-down (CKD) units were remained intact at 35 per cent, a senior official of the finance ministry told Dawn.
The official did not agree that car importers who have reportedly strong lobby in the government were given an advantage to import cars in bulk while ignored genuine problems of the local consumers who could have been given relief through reduction in CKD kits as well as CBUs.
He said a message had been given through budget measures that the government wanted the local industry to thrive and not to run away, a reasonable margin was still provided to them with a signal to compete with imported cars.
At the same time a signal was also given to the vendor industry that they should not worry about their future but get ready for a competition in the years to come. He said the rules under the transfer of residence scheme would be tightened so that it was not misused through depreciation clauses while normal gift scheme would remain intact as it was.
He said the task force on car problems had recommended a regulatory mechanism on the pattern of regulatory authorities working in other sectors to protect public interests and improve quality.
Industries minister Liaquat Jatoi, on the other hand said that local auto industry was given enough time to put the things in order but they did not respond positively. Hence the government provided relief to the people through reduction in duties on CBU cars.
"As a custodian of local industry I tried my best to protect the auto industry, but not at the cost of the interest of the common man and people of the country," Mr Jatoi said.
He agreed to the fact that local industry would be affected slightly and prices would come down, but said the local auto industry should come in competition now and take it as a positive measure.
The government's decision is for giving choice to consumers. Mr Jatoi said that for more than one year the government was trying to convince the local manufacturers that they should reduce prices, eradicate the menace of premium, improve quality and delivery time, but nothing happened.
The local industry was making huge profits but did not invest in any social service even. He said the government was currently reviewing the change of residence scheme for overseas Pakistanis to give them some relief to import with them cars.
When asked as to why the government did not reduce the duty on CKD, which could have resultantly helped reduce the prices of locally manufactured vehicles, the minister said whatever the decision had been taken in the federal budget was considered best for local consumers, who now have the choice to import new cars on competitive rates.