Sufficient inflows of USD mandatory: Relaxation on retiring of LCs not ‘unrestrained’: official

ISLAMABAD: The government on Monday said relaxation on retiring of Letters of Credit (LCs), recently announced by the State Bank of Pakistan (SBP), are not unrestrained as LCs will only be honoured if sufficient inflows of dollars come in the country.

This information was shared by the Ministry of Industries and Production (MoI&P) informally with National Assembly Standing Committee on Industries and Production, Syed Ghulam Mustafa Shah.

Additional Secretary in charge, MoI&P, Momin and Chief Executive Officer (CEO), Engineering Development Board (EDB) Raza Abbas Shah, briefed the Standing Committee that slow economic activity and higher interest rates led to a fall in car production by 43%.

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It was further informed that 1,133,072 units (cars, jeeps, SUV etc) were manufactured during the first ten months of FY 2022-23 against 2,271,991 units during CF 2021-22 which probably were the highest number in history.

According to Additional Secretary in Charge MoI&P, the main reason for the reduction in production was due to dollar shortage which led to lower imports of car parts and raw material. In addition, car financing also declined due to higher interest rate. Honda, Suzuki plants suffered closure due to non-availability of parts.

The Committee was further informed that 45 to 50 percent of total price of cars are related to taxes. It stated that the cost price of Toyota’s Fortuner is Rs 20 million of which 60 per cent are taxes. Recent hike in Withholding Tax in the budget has also pushed up prices of cars.

The CEO EDB explained that car assembling is subject to availability of required parts which come from different countries. He added that the Public Accounts Committee (PAC) has also constituted a Sub-Committee with Senator Salim Mandviwalla in the chair to investigate reasons of high prices of cars in the country.

The MoI&P gave following reasons for delay in delivery ;(i) unprecedented surge in demand after Covid-19, (ii) worldwide supply chain issues ;(iii) Electronic Control Unit (ECU) chip shortage ;(iv) pending orders with OEMs; (v) investments by new players were under process and ;(vi) restrictions on LC’s.

The committee expressed its displeasure on dismal performance of Small and Medium Enterprises Development Authority (SMEDA) which is showing its performance only on paper instead of on ground.

“The SMEDA was established 25 years ago but it has done nothing to support small and medium industry,” so stated Nasir Khan Musa Zai.

Some of the Committee members shared their thoughts on improving the working of SMEDA to increase country’s exports through guidance to young entrepreneurs so that educated youth could benefit.

Chief Executive Officer, Small and Medium Enterprises Development Authority, Farhan Aziz Khawaja, informed the Committee of Small Medium Enterprises (SME) Policy 2021 and measures taken for industrial growth in detail. The Committee discussed the financial issues of the SMEDA in detail and recommended that the Finance Ministry release pending funds of the SMEDA at the earliest.

Additional Secretary in Charge shared his views about decline in local production of goods and reliance on imported products, adding that in the past policies were not pro-industry. However, he added that his ministry is now focusing on it.

The committee deferred discussion on the Starred Question No. 183 regarding (a) details of the total worth of machinery and other material alleged to be stolen from Pakistan Steel Mills, Karachi as per Government record; and (b) the number of persons arrested along with the number of those to whom punishment has been awarded in connection with the thefts moved by Maulana Abdul Akbar Chitrali, MNA as the Mover was not present. The committee deferred the “The Export Processing Zone Authority (Amendment) Bill, 2023” (moved by Ms. Shahida Rehmani, MNA) due to absence of the Mover. Rana Muhammad Ishaq Khan, Syed Imran Ahmad Shah, Nasir Khan Musa Zai, Kiran Imran Dar, Syed Mobeen Ahmed MNAs/members also attended the meeting.

Copyright Business Recorder, 2023