A Senate committee questions the lack of localization of the automotive sector

ISLAMABAD: The Senate Standing Committee on Industries and Production on Tuesday questioned the automotive sector for its lack of localization, which has prompted the sector to import two-thirds of auto parts, making the end product expensive.

Despite being a five-decade-old industry, the sector has failed to achieve up to 90% localization. Currently, assemblers import about 65% of parts for vehicles assembled in Pakistan.

Mainly, three Japanese car assemblers which occupy more than 80 percent market share have been operating in Pakistan for almost 50 years. Yet they did not indigenize the production of critical auto parts (including the engine).

The committee which met under the chairmanship of Senator Faisal Sabzwari examined in detail the production of vehicles and the problems it was facing.

Senator Abdul Qadir said that despite the high price of the cars, the quality was not there.

The CEO of the Engineering Development Board (EDB) has urged companies to manufacture vehicle parts locally under the new policy. “Vehicles made in Pakistan can be exported overseas.”

An official told The News that despite paying the full price, buyers waited three to six months for their car. However, after paying a higher price and “own money” (premium on car prices), the car was delivered the next day.

The ministry and EDB could not persuade original equipment manufacturers (OEMs) to improve the delivery mechanism, eliminate premiums and ensure timely availability, it said. he adds.

The committee also discussed the status of mining as a formal industry by the government of Pakistan, but ministry officials said mining was a provincial matter after the 18th Amendment. As for the federation, it was supported by the Ministry of Petroleum.

“We have written a letter to the Ministry of Petroleum. As soon as the ministry approves it, a notification will be issued to declare mining as an industry,” the official said.

The committee also heard a briefing from officials of the Ministry of Industry and Pakistan Steel on the question posed by Senator Mushtaq Ahmed regarding the audited accounts of Pakistan Steel Mills (PSM) Corporation (Pvt) Limited.

Officials informed that PSM started production in 1985 and the factory made a profit of Rs 9.54 billion. Since 2008, the factory has been recording losses which the official says are due to the global recession and other factors. The company suffered a record loss of 26.45 billion rupees in 2008. From 2008 to 2014, it accumulated about 59 billion rupees as a bailout, but it could not be revived.

The factory suffered a total loss and liability of Rs 67.1 billion from June 30 to December 31, 2020. About 5,000 employees had been made redundant by golden handshakes. And after receiving the funds from the Ministry of Finance, the affairs of more employees would also be reviewed. The chairman of the committee adjourned discussion of the matter until the next meeting due to the absence of Senator Ahmed.

The details of the financial implications of the Standing Committee’s recommendations on steel prices were also examined in detail. The Secretary of the Ministry of Industry and Production informed the committee that the services of a private company would be sought to determine the exact cost of production of steel and other products in Pakistan so that prices could be precisely fixed.

Senator Muhammad Abdul Qadir asked why the price of steel was rising in Pakistan. And if we imported it would have an impact on the prices? EDB officials said work was underway and issues would be resolved in conjunction with representatives of the industries involved.

Representatives of the Major Steel Producers Association of Pakistan informed the committee that about 400 companies were producing steel in Pakistan. And most of the steel in Pakistan was made from imported scrap. As the price of scrap metal increases in the world market, the cost of production also increases, which leads to higher prices.

Senator Saifullah Khan Niazi said, “We are trying to make cheap steel available. There are other industries related to the steel industry. And price increases affect everyone.

The committee members asked for all the details at the next committee meeting to accurately determine the production costs and steel prices.

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