Industry feels threatened by imported, smuggled tyres

Says most tyres are substandard that pose a threat to vehicles, passengers.

LAHORE:

For those Pakistanis, who have their own vehicles, the influx of imported and smuggled tyres may provide a cheaper alternative, but for domestic manufacturers, the market of such tyres has reached such a scale that could severely hurt Pakistan’s industry.

Manufacturers insist that the domestic industry is feeling increasingly threatened by heavy imports of under-invoiced tyres, which are hindering the growth of their business. They believe no quality check is applied to the imported tyres, majority of which are substandard and can pose a threat to vehicles and passengers while driving at high velocity.

“It is estimated that due to under-invoicing of tyre imports, the government loses a minimum of Rs5 billion annually. This practice is increasing year by year. And the authorities are not doing anything to curb this,” said a leading tyre manufacturer but asked not to be named.

The country’s rubber industry has room to play host to three new units, but in such tricky conditions investors are hesitant to inject capital. An investment of around $300 to $400 million was needed to set up a complete unit, which could generate about 25,000 direct and indirect jobs besides giving millions of rupees in taxes, he said.

Cars, trucks, buses and light commercial vehicles running on roads in the country need 8.2 million radial tyres every year. According to statistics, Pakistan imports four million tyres while 1.6 million are sold by local manufacturers. The remaining 2.6 million are smuggled into the country.

According to the manufacturer, the locally produced tyres are in line with the best standards and cannot cause harm to vehicles and passengers while travelling.

Citing an example, he said 30 different tyre companies were working in India and catering to the domestic needs as Delhi did not allow imports in order to protect its industry.

He stressed that his company had the capacity to churn out 2.1 million tyres in a year, but could market only 1.6 million. “This comes despite the fact that our radial tyres are much better in quality than all foreign tyres brought into the country through under-invoicing and smuggling,” he said.

“We have been producing tyres for the last 50 years in collaboration with the fourth largest tyre producer in the world,” he said, adding the foreign principal had assisted the company in producing tyres that could withstand rough roads of Pakistan.

Besides losing Rs5 billion due to under-invoicing, the government is said to be bearing another revenue loss of Rs2.5 billion because of smuggling.

According to the manufacturer, around 200 to 225 trucks carrying smuggled goods including tyres cross into Pakistan from Afghanistan every day through the Chaman border. Each of these trucks usually carries goods worth Rs10-15 million.

To cope with under-invoicing, the local manufacturers have suggested a minimum increase of 50% in the import value of Chinese manufactured tyres and 40% in the value of tyres coming from other countries.

“If the authorities pay heed to the suggestion, government’s revenues could go up by almost Rs5 billion annually,” he argued.

Published in The Express Tribune, March 15^th, 2015.

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