KARACHI, Nov 25 The international prices of rubber and butyl rubber, raw materials used in tyre and tube making, have fallen sharply in the last few months, but its impact has yet to be seen in the local tyre market.

The prices of imported tyres, mainly Chinese brands, have also declined by 25-30 per cent over the last two months in the world markets and are projected to decline further by 25 per cent over the next few weeks.

The rubber price has plunged to $1,700-1,800 per ton in November from $2,800, while the price of butyl rubber has fallen to $3,000 from $6,500 per ton.

An official in the General Tyre and Rubber Limited (GTR), who asked not to be named, said the recent decline in raw materials' prices worldwide would take at least three months to see any reduction in local prices because the company had procured raw materials at higher rates.

The official claimed the company had to increase prices of its products by 25 per cent earlier due to rising costs of raw materials, surging utility charges and devaluation of the rupee against the dollar this year.

He said the company's sales plunged by 28 per cent during July-October 2008 as compared to the same period last year in view of falling production of locally-assembled vehicles. “However, the company has not cut any jobs so far,” he added.

A dealer in the local tyre market said that the GTR's Mehran radial tyre now cost Rs1,900-2,000 as compared to Rs1,400 in Ramazan. The company had actually increased the prices by 30-40 per cent this year.

“There has been no price cut in imported tyres and prices may fall in January or February next year,” he added.

Pakistan Tyre Importers and

Dealers Association (PTIDA) Chairman Azim K. Yousufzai was of the view that impact of falling world prices had started arriving in truck tyres which saw a fall of 10-15 per cent in prices and may see further cut in coming months.

Smuggling

Truck tyres smuggling is thriving owing to huge difference of Rs3,000 to Rs5,000 per piece in legal import and procurement through illegal channels.

Mr Yousufzai said the any truck that entered Pakistan Customs Post with goods loaded for Afghanistan or independent tribal regions returned back after replacing eight to 16 old tyres with new ones.

“Smugglers bear an expenditure of around Rs1,000 per tyre that covers travelling cost and bribe they pay to border authorities for safe entry,” he added.

He said the government a few years back had reduced duty on truck tyres to five per cent to check smuggling since the truck tyres were not allowed under the Afghan Transit Trade Agreement till 2005.

“Average import price of a truck tyre is Rs8,000 and after adding 29 per all government taxes and duties at import stage, it comes to Rs10,400,” he said. “The smugglers take advantage of this price differential to marginalise legal importers,” he added.

He suggested elimination of import duty on truck tyres besides lowering of sales tax to five per cent (on imported and local manufactured tyre as well) would help check discouraging its smuggling effectively.

This would not only boost government revenues in the form of increased imports but would also turn smuggling unattractive, he explained.

He said that almost 90 per cent of car tyres were also smuggled into the country because the import duty on these tyres was 25 per cent plus sales tax and withholding tax. “This duty is said to have been imposed to protect the only local car tyre manufacturer who does not have the capacity to meet 25 per cent of demand, hence smuggling is rising.”

He said unlike a decade ago when smuggling of big tractor tyres was not possible the price differential after payment of import duties had made this possible, though on a limited scale. “A pair of rear tractor tyres after payment of 25 per cent import duty and 16 per cent sales tax now cost Rs26,000.”

He appealed to the government to waive the duty on tractor tyres as it had withdrawn duties on all agricultural implements. That, he said, would reduce the price of a pair of rear tractor tyres by Rs10,000-Rs12,000.

The annual consumption of tyres (passenger cars, light truck and truck/bus) stands at seven million units. Only 1.42 million tyres are manufactured locally while over two million tyres are imported while the rest around 3.57 million tyres are being smuggled.

The PTIDA chairman said that the exchequer suffered an estimated loss of Rs890 million per annum due to tyres smuggling.