Pakistan Ministry of Industries and Production ordered to break the monopoly of car assemblers

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Pakistan Ministry of Industries and ProductionPakistan Ministry of Industries and Production (MoI&P) has been asked by the parliamentary panel to break up the monopoly of local car assemblers, end the own money system and submit their agreements along with reasons for not running plants at full capacity. The meeting was presided over by Senator Hidayat Ullah Khan.

Secretary Industries and Production, Khyzer Hayat Gondal said that there are issues relating to compliance of measures since implementation of new auto policy from July 1, 2016. He further stated that existing car assemblers have market monopoly as there is no other company or manufacturer and sometimes they abuse it. Senator Kalsoom Parveen said that on one hand quality of locally manufactured cars is worse as compared to the past and on other hand imports of used cars have been made difficult by increasing duty and decreasing age of cars.

She said when consumers start relying on local assemblers they prioritise delivery to “profiteers” instead of to real consumers. When she enquired about exact demand and supply position from the CEO, EDB, he failed to provide the information which irritated the Secretary Industries who is already closely monitoring EDB’s performance. CEO EDB informed the committee that the total production capacity of local cars assemblers is 0.3 million per annum but he suddenly changed his statement, saying that 0.3 million units are manufactured if plants operate in two shifts.

This statement angered the committee members who maintained that when the EDB has no data of demand, supply and actual production, then on what basis do the EDB officials visit the offices of Chambers’ of Commerce. “You have links with the dealers who are making money by selling cars at higher rates,” Kulsoom Parveen said, addressing CEO EDB. When the Secretary Industries enquired from the CEO EDB about actual booking with the three car assemblers he stated that he has no data of booking.

CEO EDB also revealed that “on” money still exists whereas tax for filers and non filers is different. One of the committee members suggested that filers should be given priority over non filers in delivery of cars. CEO EDB revealed that local assemblers have not shared their agreements with the Engineering Development Board so far and just M/s Honda shared its standards as the company is complying with Euro four standards. “As we receive documents from Toyota and Suzuki, a comparison will be submitted to the committee,” he added.

To the query what if the companies do not share their standards and agreements then what will EDB do, CEO EDB replied that the organisation will get documents from the SECP. Chairman Standing Committee directed the CEO EDB to bring the agreements of car assemblers before the committee. Senator Mian Ateeq Muhammad Shaikh said that local assemblers are involved in cartelisation and making high profits through “own” money. His main attack was on Indus Motors, after Engineering Development Board (EDB) revealed to the committee in writing that M/s Honda had shared its standards with the Board whereas M/s Indus Motors and M/s Suzuki Motors did not.

“I had expressed my concerns with respect to the Indus Motors which manufacture Toyota brand. There is general perception that they are above the law because they don’t accept directions from any department. I understand most of their matters. The inability of EDB is another matter. They fix the price on their own and increase prices on their own. On the other hand, they charge “own” money from the consumers for early or immediate delivery,” he added.

He requested the Standing Committee members to consider issues related to “delivery” time of the cars. CEO EDB informed the committee that M/s Toyota has immobilisers’ issue on XLI model whereas this system is available in other models of Toyota. He said that Toyota and Suzuki have obtained stay order from the Sindh High Court (SHC) against the immobilisers.

In reply to a question raised by Chairman Standing Committee Senator Hidayatullah, CEO EDB said that the organisation is reviewing other measures announced in the new auto policy and the auto makers are implementing it. According to him, Secretary Industries has already ordered strict implementation on consumers’ safety measures announced in the policy and the EDB is doing it.

CEO EDB further stated that local assemblers are seeking time to fix immobilisers and airbags but they will not be given the time they have requested as per the instructions of the Secretary. “Car assemblers are seeking five years to install immobilisers and airbags but I have stated at public fora that they are technically strong and can do this overnight. The purpose to install immobilisers is to control theft,” he added CEO EDB assured the committee that the EDB would contest the case in SHC on technical grounds and sought time so that the court could be briefed on this issue in detail.

He said, duty has been slashed on the parts being used by existing assemblers from 32.5 percent to 30 percent aimed at maintaining low prices. When Chairman Standing Committee enquired if a car is not delivered to the consumers within 60 days, what mechanism EDB has evolved to implement this aspect of Auto Policy, CEO EDB had no answer. He, however, said that if the car companies fail to comply with delivery time condition, the EDB will ultimately stop giving low duty on their inputs.

Senator Mian Ateeq argued that the EDB should discontinue the variant instead of giving them more time. Senator Taj Haider said, “a new trend has come into existence. When any government department goes towards compliance, big companies and multinationals get stay orders especially in Karachi,” he continued. He cited the example of 35 pharmaceutical companies which have obtained stay orders from courts after increasing prices by 700 percent.

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