KARACHI: An auto industry expert has urged the government to address inflation through modern economic solutions instead of relying on obsolete methods of price control. Talking to Business Recorder, S M Ishtiaq, CEO SM Engineering said that the government has recently issued two SROs reviving the 44 years old 'Price Control and Prevention of Profiteering and Hoarding Act, 1977' and amending it to manage the inflationary pressures.
"Whoever has thought of this bright idea has found a solution that is even worse than the problem itself," he said.
"The price control mechanism of the 70's was discontinued as it proved itself to be totally useless rather damaging for the economy. With recent legislation the dead and buried system has been resurrected," he added.
The SRO 1062(I)/2021 and 1065(I)/2021 are both dated August 24, 2021. Between the two SROs the list of essential items has been revised and divided into three parts. The structure to manage prices has also been revised. Secretary Industries is now assigned the powers of 'Controller General' under the 'Price Control and Prevention of Profiteering and Hoarding Order 2021'
He said that the law has been amended well and covers a lot of eventualities. However, going through the recent amendments it is evident that the government is in panic and is seriously short on ideas to manage the market forces. Somebody has to advise the government that 'bad coffee brewed properly still tastes bad, said Ishtiaq.
Numerous industries are at a loss about what to make of the new law. In the present form the law only addresses controlling the prices of targeted items and has conveniently missed out the intermediaries that constituted the cost of final products. He argued that if the cement price is fixed and that of its production elements like electricity, limestone, clay, marl, iron ore, and silica sand are allowed to escalate how will the industry survive?
Another auto industry expert said that automobiles and tyres now fall in Part 1 of the SRO 1065(I)/2021. This puts them in the administrative control of Secretary Industries. He said steel sheet price has increased by Rs.5/Kg on September 01st. The increase in locally made steel since January 2020 has been Rs.92. Steel appears at serial number 14 of Part 1; its items are also under the administrative control of the worthy Secretary. To place the impact in perspective it may be mentioned that only three materials - Steel Sheet, Aluminium, and Forging - constitute almost 60% of the cost of materials used in a vehicle. The cost escalation in the last five months alone is 27% in Steel Sheet, 15% in Aluminium, and 36% in forgings. It may be the government and not the industry that may be asked to explain why prices should not be increased rather than be kept stagnant.
Regulating the input cost, the output cost, and directing the import and export quantities have killed the market mechanism, causing to the disadvantage of all concerned," he said and added that if market forces are not respected, then the results would once again come back to haunt the government.
Copyright Business Recorder, 2021