Pakistan's General Tyre fears 'total destruction of local industry'

ERJ staff report (TP)

Karachi – General Tyre and Rubber Company of Pakistan Limited (GTR) said it is concerned over budget proposal 2014-15 given by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and complained to the FPCCI president, reported The News.

The FPCCI had, in its budget proposal, asked the Federal Board of Revenue to reduce duties on tire imports.

The company said the proposal will lead to “total destruction of the local industry that supports growth and strengthens the country’s economy”.

GTR, in the letter written to FPCCI President Zakaria Usman, said the proposal, instead of representing every segment of the industry, mostly favoured those traders who import tires and sell in the local market. These traders, the letter added, do not play any significant part in stabilising macroeconomic indicators.

GTR urged the FPCCI to be “more impartial in future submissions, and reissue the statement, correcting the damage that has been done by recommending policies in favour of traders”.

The tire company also disagreed with the FPCCI’s suggestion to reduce duty on items that are smuggling prone. “Smuggling can be greatly minimised by solid administrative controls, as done all over the world. Depriving the government from its legitimate revenue by reducing the duties is not an option,” said the letter.

“[The] Government can set up Customs check posts every 100km on roads leading from the borders to main consumption centres, and vehicles found with contraband can be impounded and the goods confiscated. A few such confiscations will be enough to curb smuggling.”

GTR said reduction in duty will only kill government revenues, because the government has already been getting only 20 percent or thereabouts of actual revenues. Rampant under invoicing is one of the reasons for low revenues, a subject that the FPCCI has kept quiet on due to the influence of traders present in FPCCI, the letter alleged.

It was also communicated that the suggestion of doing away with sales tax registration requirement is also against the government. There is an urgent need for the government to enforce complete documentation of the economy, so that all such underhand deals and the associated people are exposed.

The firm also highlighted that the local tire industry has the potential to meet the demand of every size of the tire market. The local industry produces 36 sizes in different categories – such as passenger cars, light trucks, heavy trucks, etc., and 75 percent of total imports during 2012-13 were of these very sizes giving a "tough time" to local production.

GTR further noted that the FPCCI, being the premier body in the country does not even have proper import statistics. GTR believes the total market demand for tires in the country was 8.2 million in 2012-13.

Imports were four million, local production was 1.8 million while smuggled tires were 2.4 million. Industry estimates that through under invoicing and smuggling the government loses around Rs25bn (€185.5m) annually.

GTR urged the FPCCI president to reissue the budget proposal statement by taking all stakeholders on board, and giving the tire industry’s concerns a prominent space in the larger interest of the nation, while vowing for a documented economy and promotion of legal and ethical practices to help the government.

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Full story from The News