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‘Under invoicing, smuggling hurting local tyre industry’

LAHORE: Under invoicing and influx of smuggled tyres is hurting the local industry, which is forced to operate much below its capacity at 2.5 million tyres production per year while the annual demand is 6 million per year.

Shahid Hussain, CEO of the General Tyre Company while apprising the members of the Lahore Economic Journalists Association about the state of tyre industry in Pakistan said.

He said the country is losing billions in foreign exchange and in revenue as the local market is flooded by brands coming from all over the world which find their way into Pakistan through under invoicing and smuggling.

He said the ongoing economic downturn has also taken its toll as the manufacturers. They planned and executed huge capacity expansion in 2005-06 when it was projected that the country would be producing over half a million cars by 2010-11. He said the manufacturers do not even see the production levels to match production achieved in 2006-07.

He said it is incomprehensible as to why the massive under-invoicing is tolerated by the government. “It is just a matter of finding the right price through Internet,” he said adding that the export price fetched by local tyres is another indicator of globally competitive rates. Smuggling is conducted mainly due to loopholes in the Afghan Transit Trade Agreement. He expressed surprise that there are no quantitative curbs on imports of tyres to Afghanistan although the authorities are fully aware that these imports are meant for Pakistani markets. The population of Afghanistan is less than 20 percent the population of Pakistan while 63 percent of its population lives under poverty levels. Yet its imports are completely disproportionate to its needs. He urged the government to plug the massive loopholes in ATT if it desires the industry to survive, grow, create more jobs, pay more taxes and export goods to earn foreign exchange.

He said denial of domestic market to Pakistani tyres has forced the manufacturers to discontinue exports of bus and truck tyres they started in the 1990’s as the cost of production has increased due to low capacity utilisation.

The under invoicing is not only impacting the tyre industries but the tube manufactures are also impacted. A leading motorcycle tyre and tube manufacturer, Arif Saeed said that under-invoicing has wiped out the local tube manufacturers from the after sales market of motorcycle tube in Pakistan. He said the local manufacturers have firm grip on the motorcycle tyres that are purchased by all original equipment manufacturers (OEMs).

Arif said the irony is that the rate of butyl rubber, the basic raw material of tubes, has doubled from $2400 per tonne in April 2007. However he added the import tariff price (ITP) of motorcycle tubes has increased from $0.50 to $0.55 per piece from China and $0.60 to$0.66 per piece from India. He said these prices are ridiculous as Pakistani motorcycle tube manufacturers are currently exporting the motorcycle tubes around the world at rates ranging from $1.48 to $1.86 per piece. staff report

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