The federal government has devised a plan to end the illegal business of ‘ON money’ or car premium on the purchase of new cars. According to this plan, several car dealers demanding ‘ON money’ for early delivery of new cars will be blacklisted.
As per media reports, the decision was taken in a meeting chaired by Prime Minister’s Advisor on Commerce, Textile, Industry and Production and Investment, Abdul Razak Dawood, on Monday. The officials of Engineering Development Board (EDB) – a body to regulate automobiles sector – were also present in this meeting.
The local carmakers were asked to provide written “testimonies” of assurance that they will act against their dealers who charge illegal money. ‘ON money’ is usually charged from new cars’ customers over and above the invoiced price. The customers are literally forced to buy new cars at exorbitant prices for early delivery. The new regulatory framework is expected to keep a check on this illegal business of some auto dealers.
In an earlier cabinet meeting on April 2, 2019, Prime Minister Imran Khan had formed a committee to ban this practice. The committee, comprising ministers for law and finance, was directed to regulate the purchase of new cars through various steps, including penalties on dealers and manufacturers.
CARMAKERS DENY INVOLVEMENT
Although it is widely believed that carmakers support dealers in collecting ‘ON money’ from purchasers of new cars, they have time and again denied any involvement in it. Car dealers often maintain that due to the wide gap in demand and supply of some new cars, they are forced to charge premium money.
On March 20, 2019, the federal cabinet had directed to stop the collection of ‘ON money’ and called it exploitation of car buyers.
Meanwhile, the longstanding issue of illegal ‘ON money’ business is still persistent due to disagreement on mandate within the government bodies. Ministry of Industries had earlier reasoned that the Competition Commission of Pakistan should take strict action against local car assemblies as issues like cartelization are under its domain.
It is pertinent to mention that the previous PML-N government had introduced Auto Development Policy 2016-21 to create a more competitive auto market. The policy provides tax incentives to new car manufacturers entering the Pakistani auto industry.
Under the present policies, buyers of new cars cannot be charged over 50% of total cost. The local auto assemblers are bound to deliver the new cars within two months after payment of the advance. The carmakers will pay 2% fine if the delivery is delayed.