Smuggling hurting tyre industry

60% of tyres are smuggled, causing revenue loss of Rs50 billion to national exchequer

KARACHI:

Tyre manufacturers have said that smuggled tyres are causing a revenue loss of Rs50 billion to the national exchequer and also impeding the way for new investment in the industry.

While talking to the Express Tribune, the spokesperson for the Ghandhara Tyre & Rubber Company Limited (formerly known as The General Tyre and Rubber Company of Pakistan Limited) (GTR) said, “New investment in the tyre industry will only come when smuggling stops.”

GTR is Pakistan’s leading tyre manufacturer and has invested over Rs5 billion in the last five years as part of its continuous investment program to upgrade and improve its product quality.

According to an official from the company, “The local tyre industry is facing a huge threat to its survival due to smuggling. The total estimated value of smuggled tyres comes to around Rs300 billion which results in a loss of over Rs50 billion to the national exchequer.”

“Tyre smuggling has been present in Pakistan for quite some time, resulting in a loss for the tyre industry and putting a huge dent on the national exchequer in the form of revenue loss,” noted Ali Asif, Auto Sector Analyst at Insight Securities.

“Therefore, the government of Pakistan should take necessary action to fix the losses through vigilance at custom level, local markets and at borders with neighbouring countries,” he added.

“The local tyre industry, through import substitution, has been saving precious foreign exchange and contributing to the country’s economy,” said the GTR spokesperson.

The spokesperson added that the total tyre market in Pakistan is close to 14 million tyres, excluding motorcycle and rickshaw tyres. Local production helps meet 15% of the demand, 25% is met through imports while the rest, roughly 60%, are smuggled into the country.

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“In order to promote the local sector, the government must put an end to tyre smuggling, which costs the national exchequer in the billions of rupees,” said Asad Ali, Auto Analyst at Al Habib Capital Markets.

The GTR spokesperson emphasised that if rampant smuggling is brought under controlled, the resulting gap could be filled by local manufacturers and legal imports. This would also enable the government to increase its revenue collection from the industry.

“Smuggling continues unabated due to a lack of coordination between the various government authorities who are responsible for controlling it,” highlighted the GTR spokesperson.

He added that items under the guise of Afghan Transit Trade are either unloaded in Karachi or come back from the Afghan border via smuggling.

“The government needs to curb the smuggling of tyres. Smuggled tyres are less expensive than locally manufactured tyres, and this hurts the tyre industry badly,” noted Arsalan Hanif, an Auto Analyst.

“The government should re-evaluate the data of the items being imported via the ATT and see if the number of tyres being imported are supported by the vehicle population in Afghanistan,” suggested the GTR spokesperson.

“As confirmed from local sources, the smuggled tyres are being transported from Dubai through containers or launches and then unloaded in Karachi from where they are being further distributed in different parts of the country. Crucially, the customs department should ensure that this facility is not misused,” he stated.

Published in The Express Tribune, September 23^rd, 2022.

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