The government is considering a mechanism to set up a price regulatory board to fix prices of cars in a bid to end the monopoly of automakers.
It is learnt that carmakers had given assurances to the government that they would not increase prices following a reduction in taxes on the industry in the budget for fiscal year 2021-22.
However, they did not meet the commitment and increased prices of cars, which irked the Ministry of Industries and Production.
Moreover, the automakers had also continued to receive “own money” from customers on swift delivery of new cars.
The Ministry of Industries was supposed to submit an auto policy to the Economic Coordination Committee (ECC) for review in August 2021. However, it delayed the presentation of the policy because of increase in car prices by the manufacturers.
It is learnt that the ECC, in its meeting held on December 10, took up draft of the proposed auto policy for discussion. However, the ECC’s technical advisory committee recommended that the matter should be deferred. Following that, the ECC put off the review of the policy.
The Ministry of Industries was also upset with the Engineering Development Board (EDB), which it believed was not playing its due role to protect customers.
During the previous Pakistan Muslim League-Nawaz (PML-N) government, then prime minister had decided to dissolve the EDB after receiving complaints of malpractices from different quarters.
Ministry of Industries officials said that a proposal was recently floated that suggested the setting up of a price regulatory board, comprising representatives of the ministry, EDB and auto industry to take decisions on revision in car prices.
They said that the minister for industries asked officials of his ministry to consult the Law Division on the proposal.
However, the EDB opposed the setting up of the price regulatory board. At present, the EDB is the regulator of domestic industries including automakers.
The previous government had also approved an auto policy aimed at ending the monopoly of domestic car assemblers. It noted that the carmakers were using obsolete technology and did not fully adopt the auto parts deletion programme.
It took serious notice that the automakers were charging customers a premium on the delivery of new cars.
The former government also offered incentives to new entrants for setting up car manufacturing plants in Pakistan. Consequently, several companies established their manufacturing plants, which have now started producing cars.
The Pakistan Tehreek-e-Insaf (PTI) government is also upset about the increasing car prices and the collection of “own money” from the customers.
In July 2021, Minister for Industries Makhdoom Khusro Bakhtiar announced a reduction in car prices following tax and duty cuts on automobiles in the FY22 budget.
The government removed federal excise duty and additional customs duty on cars along with reduction in sales tax on small cars.
In the Finance Bill 2021, the government slashed the federal excise duty by 2.5percent on all vehicles up to 3,000cc engine capacity. It withdrew the excise duty on vehicles from 660cc to 1,000cc and slashed general sales tax to 12.5 percent from 17 percent on cars up to 1,000cc.
Bakhtiar also revealed that they were making efforts to increase automobile production to 300,000 units this year through incentives and other measures.