By Aamir Shafaat Khan
Wednesday, 11 Feb, 2009 | 10:07 AM PST |
KARACHI, Feb 10: Auto part makers are alarmed over the rising trend of using imported parts instead of procuring them from the local vendors by leading assemblers.
Many car assemblers are importing even those parts for their new models that can easily be produced by vendors locally.
As per the Tariff Based System (TBS), the components which have already been localised cannot be rolled back and imported on concessionary rate of duty. Currently many car and heavy vehicle assemblers are importing many components which were localised along with their CKD components availing concessionary rate of duties.
Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), after receiving numerous applications of grievances regarding rollback of localised parts, had confidentially asked their members in December 2008 to provide details of parts which they are currently not supplying but had been supplying prior to Auto Industry Development Plan (AIDP).
The association had also sought details of assemblies, components and sub-components which were locally manufactured, but are now being imported.
However, many PAAPAM members, either for fear or apprehension, had still not given any positive response to the association.Sheikh Muhammad Iqbal, General Manager Marketing Balochistan Wheels Limited, said that at present some truck/bus makers were using imported wheel rims, whereas a Lahore-based car maker was also using imported rims.
He said maker of Honda car had failed to achieve the localisation target and therefore the prices of their cars were too high as compared to other cars of same specifications. The company had launched Honda City in January 2009 at a price of Rs1,319,000 (manual) and Rs1,439,000 (automatic).
He added that the planned localisation of components was 39 per cent for Honda City but actually it was just 29 per cent.
“The Japanese yen that has appreciated by 58 per cent against the rupee, has not only made imports of parts expensive but has also begun to injure assembler’s sale because of high prices,” he said.
“It has to be realised and understand by the car and heavy vehicle assemblers that maximum localisation is in their best interest,” he added.
He said currently hundreds of components like wheel rims, silencer, muffler, sheet metal body parts, rear floor pillar, pillar front inner, side rail roof, fuel tanks, carpets and seats were being imported by assemblers of car and heavy vehicle.
Shaikh Iqbal said the Tariff Based System had failed to produce results since assemblers kept on importing parts from their principals or other sources through ghost vendors or under CKD availing concessionary rate of duties. “Due to this reason most of the vendors are in trouble and finding it hard to stay in business.”
Meanwhile, Director Sales and Marketing, Hinopak Motors Limited (HML), Mohammad Irfan Shaikh said that “the company is still using local rims as per the government’s policy of promoting localisation.”
But he added that majority of his customers were complaining about the poor quality of locally-made wheel rims and many of them have replaced the local rims with imported ones.
PAAPAM is reported to have taken up the rollback issue with the Engineering Development Board (EDB) asking it to give details of input/output ratio allowed to vendors and assemblers under SRO 655 since AIDP came into force. The association has also sought details of all imports by assemblers in their CKD kits besides re-examining of all inputs/output ratios approved to date. However, the EDB had yet to give any details.
PAAPAM has repeatedly asked the government to implement the TBS in its letter and spirit but nothing has been done so far. Auto makers have made windfalls without patronising the local industry like India where multinational companies pass on technical know-how to the local industry which has enabled India to export auto parts at larger level.
The local auto vending industry on its own has fully equipped itself to produce a large number of auto parts but their investment of billions of rupees remains idle and their factories are working under capacity due to apathy of assemblers.
Another vendor, asking anonymity, said that the government should form a team of EDB with PAAPAM members to visit Karachi Port for getting full assessment of the customs authorities on its working and verification of illegal assembling of vehicles from imported components. Importance of audit is necessary as the facility of import on components at lower rate of duty is being used by some manufacturers.
He said that the audit would also verify and reconcile the lawful assembly manufacturing of vehicles from the CKD kits imported directly by the assemblers under the import policy at normal rate of duty and parts, attracting additional custom duty.
He added that the government should also introduce a strong mechanism at the appraisement/import stage so that necessary cross-checks could be under taken to ensure that auto parts imported under SRO. 693 (1) 2006 must attract 35 per cent duty plus 15 per cent additional duties. “A large number of vendors have lost business due to unlawful import of components under this SRO,” he lamented.