Used car imports: Notification to reduce age suggested to be withheld

Parliamentary panel says age reduction was a result of ‘underhand deals’.

ISLAMABAD:

A parliamentary panel has termed the government’s recent decision to reduce the import age of used cars “non-transparent”. It has also recommended that the commerce ministry withhold the notification to that effect, suspecting “underhand deals” between federal ministers and the automobile lobby.

Eyebrows were raised in the National Assembly Standing Committee on Finance and Revenue when the commerce ministry disclosed that the claim that import of used cars had adverse implications for local car assemblers was not backed by any empirical study.

The commerce ministry said it had opposed the summary: firstly, on grounds that the Ministry of Industries cannot initiate trade proposals under the rules of business; and because it had been the one to suggest that a “deep sector-specific study” be done before a final decision was taken in order to verify the claims made by car assemblers.

Ministry of Commerce’s Additional Secretary Fazal Abbas Maken said the ministry had assigned two studies in this regard to the Competition Commission of Pakistan and the National Tariff Commission. However, before these institutions could submit their reports, a sub-committee headed by Deputy Prime Minister Chaudhry Pervaiz Elhai – who is also the Federal Minister for Industries – instructed the Economic Coordination Committee (ECC) of the Cabinet to reduce the allowed age limit for import of used cars.

In a hurriedly-called meeting, chaired by Finance Minister Dr Abdul Hafeez Shaikh, the ECC had reduced the age-limit for imported cars from five to three years. The meeting had been convened on a public holiday in Islamabad.

“It seems the deputy prime minister took the decision in haste,” observed Khawaja Sohail Ahmad, the chairperson of the Standing Committee on Finance and Revenue. He questioned whether the fate of consumers should be left on “the outcomes of a meeting between the deputy prime minister and car assemblers”.

He said the commerce ministry’s statement only confirmed that the decision was taken without proper homework, and the parliamentary committee would not agree to it.



“The committee recommends the commerce ministry withhold the notification until the production cost-related study and two other studies already commissioned by the ministry are completed.”

The committee also sought details of the cost of production of automobiles and end-consumer prices.

“The fresh policy is non-transparent, dubious and a result of underhanded deals and connivance between the Ministry of Industries and car assemblers,” Khawaja Sohail Ahmad alleged while recording the committee’s recommendations.

“The inefficient and non-competitive car assembling companies were making windfall profits due to their settings with federal ministers, as these assemblers cannot even compete with used cars [sic],” committee member Rasheed Godil observed.

Earlier, the chief executive officer of the Engineering Development Board (EDB) had claimed that a government decision in February 2011, increasing the age limit on used cars from three to five years, had adversely affected the sales of three local brands.

He said the decision led to an increase in import of used cars from 8% of local production to 37%. He said the decision had been taken to compel car assemblers to reduce prices, which could not happen “due to the high cost of used cars”.

While terming the presentation factually incorrect, apparently because it showed prices of used cars as being higher than prevailing prices, the committee chairman had slammed the EDB, saying it was working as “the lawyer of the car mafia”. The EDB CEO could not establish how the recent decision to reduce the age limit would benefit consumers, despite repeated questioning.

“The decision will benefit only three industrialists at the expense of consumers,” countered Ahmad. “If the cost of running the auto industry is so high, let it die down.”

Shehnaz Wazir Ali, the prime minister’s assistant on the social sector, observed that the ECC’s recent decision was self-contradictory, as it neither benefits the consumers nor the industry. She said the industry was unable to run on full production capacity despite all types of protection, which she said shows that “something is seriously wrong”.

For all its vehemence, the standing committee’s recommendations are non-binding on the government. However, the additional commerce secretary assured the matter will be placed before the federal cabinet for consideration in the next meeting.

Published in The Express Tribune, December 5^th, 2012.