Auto makers took Rs271bn in advance from consumers, PAC told

ISLAMABAD: The Public Accounts Committee (PAC) was informed on Tuesday that car manufacturers have received more than Rs217.6 billion payment in advance from customers.

MNA Noor Alam Khan chaired the PAC meeting where Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) gave a comprehensive briefing on delays in car delivery. The committee directed the car manufacturing companies to deliver vehicles within one month to customers who pay 100 percent payment in advance.

The ministry of industries and production secretary told the PAC that car manufacturing companies take advance money ranging from 20 to 100 percent while none of the manufacturing plants are running at 100 percent capacity.

The Auditor General of Pakistan said if they are running their plants at 50 percent capacity, 50 percent car import may be allowed to improvement persisting situation. The secretary told the committee that cars are meant to be delivered within 60 days after bookings and if a company does not do so, it will be charged a KIBOR of three percent. He told the committee that in the last two years, car companies have paid Rs1.9 billion to customers.

PAC Chairman Noor Alam Khan said that even after receiving the full payment in advance, the car makers demand Rs4 lakh more from the customers. “Under which law such a demand is made,” he asked.

The industries secretary said that over Rs217.6 billion is lying with the car manufacturers as advance payment. The secretary said that due to low demand, manufacturers are operating at a low capacity, so the government suggests the car manufacturers not to make bookings beyond three months. The Committee said the car companies must not take an advance amount of more than 20pc for booking and if the vehicle is not delivered within 60 days despite the 20% advance, they will have to pay interest at three percent KIBOR after 30 days.

Khan said that after the previous meeting of the committee, the car manufacturers further increased the prices. “These are not the car manufacturers but the assemblers,” he said. The secretary said that the annual demand for vehicles in Pakistan is 0.35 million. The committee members said vehicle manufacturers “are allowed 200% profit but the quality of their parts is substandard”.

Khan asked the ministry of industries and production and ministry of commerce secretaries and FBR to suggest how to reduce the concessions given to the companies and if they [FBR and secretaries] don’t, the committee will itself correct things. The commerce additional secretary said duty protection to car manufacturers has been raised from 300 percent to 500 percent.

PAC member Saleem Mandviwalla said: “If we can reduce the tariff on the import of old vehicles and if the duty protection from 500 percent is reduced to 400 percent even then they can still make a lot of profit,” he said.

The PAC chairman said that the customers who paid 100 percent payment in advance should not be charged more with an increase in car prices. He said automakers pay 10 percent duty instead of 35 percent by bringing the engine in three parts. “Is it true that the CKD kits are made in three parts to save taxes,” he questioned. The FBR officials replied that it is not determined by the FBR but by the Engineering Development Board.