Efforts to curb tyre smuggling bear fruit

Pandemic, higher import duty, rupee depreciation push up tyre prices

LAHORE:

Efforts of the government to curb smuggling via Afghan border have helped put the four-wheeler tyre manufacturers on a positive track.

Nevertheless, developments in the past one year - Covid-19 outbreak, higher import duty structures coupled with increase in US dollar rate and better surveillance on the border to check smuggling - have led to an increase in prices for both local and imported tyres.

“Purchasing power of the common man has dropped to the point that demand for second hand imported tyres has been on the rise since the lockdown restrictions were eased,” said a Lahore-based tyre importer while talking to The Express Tribune.

He added that currently the country’s only tyre manufacturer, General Tyre, was catering to just around 20% of the demand while the rest was met either through import or smuggling via Afghanistan. “All recent developments have pushed up prices to exorbitant levels.”

Meanwhile, General Tyre CEO Hussain Kuli Khan said that improved profits of the company indicated that strict surveillance on borders during Covid-19 played a positive role in the company’s performance.

“This is the reason why smuggled tyres are not available in the market, which has helped the local industry to increase its share,” he added. The company earned after-tax profit of Rs406 million in the first six months of current financial year against earnings of Rs29.4 million in the same period of last year.

The company recorded net sales of Rs6.45 billion in Jul-Dec 2020, which was up 41% from Rs4.56 billion in the corresponding period of previous year.

Besides domestic demand, the company’s exports increased twofold in the period under review as it exported tyres valuing at Rs93.3 million.

“Curbs on smuggling are a good sign but alternative options should be explored to stop price hike in the open market,” said another importer Ali bin Nasser.

At present, only one company was manufacturing four-wheeler tyres in Pakistan and there was a need to increase the number of such manufacturing units if the government wanted the end-consumers to truly benefit, he added.

He said that scarcity of imported tyres in the post-lockdown scenario had resulted in 80% hike in prices for imported tyres. “This hike is a direct result of little smuggling, higher import duties and increase in dollar rate.”

People still prefer used imported tyres over locally manufactured new tyres, though the supply of smuggled tyres has gone down by up to 70%. “Lower purchasing power of consumers has forced them to ask for second hand tyres”, he added.

Apart from the open market, General Tyre, which is in the process of developing new sizes of tyres besides exploring long-term business opportunities, is still facing challenges.

“The local tyre industry is facing problems due to heavy under-invoicing in the import of tyres that also causes revenue loss to the government,” said Kuli Khan.

“The government should re-evaluate ITPs (Import Trade Prices) at least twice a year if not every quarter as raw material prices have been going up since last November.”

He hoped that the authorities would further strengthen measures to control under-invoicing and smuggling in order to provide a level playing field for the domestic manufacturers.

Published in The Express Tribune, March 10^th, 2021.

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