Ministry of Industries and Production on Monday sought written "testimonies" from local car assemblers, with the assurance that they will take strict action against their dealers involved in 'on money' (premium money), well informed sources told Business Recorder.
This assurance came at a meeting presided over by the Prime Minister's Advisor on Commerce, Textile, Industry and Production and Investment, Abdul Razak Dawood, who expressed reservations at assemblers for their alleged "involvement" in 'on money' charging.
The federal cabinet, in its meeting on April 2, 2019 decided to take strict measures against local car assemblers for charging premium (on money) from customers over and above the invoiced price. "Assemblers will submit in writing that they will penalise the dealership for malpractices," the sources added.
The Cabinet took the decision during a discussion on the decisions of the Economic Coordination Committee (ECC) of the Cabinet on March 20, 2019 on the subject titled "auto industry (sale of new vehicles on more than retail price)"; it was deliberated that premium/on which is charged by car dealers over and above the fixed market price of newly manufactured cars, is exploitation of car manufacturers, in connivance with car dealers and needs to be stopped.
The authorities believe that dealers have blessings of assemblers with respect to 'on money'. However, assemblers deny such charges.
The sources further maintained the illegal practice of charging premium by car dealers from genuine buyers is primarily attributed to persistent gap in demand and supply of certain variants. The condition of being filer for purchase of new cars, introduced in Finance Bill 2018 discouraged the practice of charging premium. However, the condition of non filers was withdrawn through the Second Supplementary Bill 2019 which has reportedly caused a hike in premium.
According to sources, car assemblers also proposed levy of transfer tax on selling of cars within a year, saying that additional transfer tax i.e. would make it less attractive.
The Ministry of Industries and Production has to get back to the cabinet on this issue, said an official on condition of anonymity.
The federal cabinet constituted a three-member cabinet panel comprising Minister for Law and Justice, Farogh Naseem, Finance Minister, Asad Umar and Abdul Razak Dawood to prepare a regulatory framework including penal provision, if required, within three weeks to check the illegal practice of charging premium by car dealers from genuine buyers, over and above the invoice price of the vehicle.
The cabinet also decided that in doing so, capacity and production standards of different car manufacturers and vehicle safety standards may be kept in focus. According to sources, the cabinet directed that the decision be brought for information to the cabinet, after doing the needful.
Industries Ministry argues that Competition Commission of Pakistan has the mandate to address the issue of cartelization, deceptive marketing abuse of dominant position and thereby protect rights of consumers.
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