Auto sector hails, analysts fail to fathom ban reversal

Govt lifted sanction on importing CNG kits much to the delight of car industry.

KARACHI: Stakeholders, who were anxiously waiting for the sanction to be lifted for over two years, have hailed the government’s decision to lift the ban on the import of CNG kits. 

Word has it that the government has taken this decision following diplomatic pressure from Italy and Japan.

It should be noted that Japan has a direct stake in Pakistan’s auto industry — each of the three carmakers in Pakistan are of Japanese origin. In addition, there are two CNG kits makers/assemblers in Pakistan – Landi Renzo and BRC – and both are from Italy, which is one of the leading CNG equipment makers in the world.

Though the decision is highly favourable for the local car industry as it will support car sales, a leading car company official  fell short of appreciating the government decision. “It is better to wait and see where the situation leads. It is too early to comment on the decision.”

Despite getting what the industry had been dreaming for some time, there is a fear among officials that the government may cave in to pressure from people who are against the decision as they are greater in number. Those in favour of the ban argue that there is still an acute gas shortage in the country. The previous government banned the import of CNG kits two and a half years ago in December 2011 for the same reason.

The development has rekindled hopes of those associated with CNG kit makers and car companies. “Lifting the ban is good news. This will help support economic activities in the country. CNG kits assemblers will certainly take three to four month to restore their businesses which were at a standstill since the previous government slapped the ban,” said a top official at a CNG kit assembler.

“Foreign investors may also come back to Pakistan who left after the ban on kit imports,” said Hasan Askari, BRC’s agent for carmakers in Pakistan.

However, for analysts, the government has made a big mistake. “There is no apparent logic behind the removal of the ban because the situation of gas shortage persists. Nothing has changed in the last two and a half years. In fact, the situation has deteriorated. The decision may have been justified if there was any new gas coming in or if the country had started producing more,” Emerging Economics Research MD Muzammil Aslam said.

Published in The Express Tribune, July 8^th, 2014.

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