The government is planning to set up a price regulatory board to revise car prices to end the unabated (and at times unjustified) price hikes.
Car manufacturers had previously assured the government that they would refrain from raising the prices of cars due to the reduction in taxes on the auto industry in the FY2021-22 budget, as reported by Express Tribune. However, they declined to keep their word, which vexed the Ministry of Industry and Production. Officials stated that the automakers also kept charging customers premium (own money) for early delivery of new vehicles.
The ministry intended to propose an auto policy to the Economic Coordination Committee (ECC) to be reviewed in August 2021 but it was delayed due to the price hikes by the auto manufacturers. It was also disappointed by the Engineering Development Board’s (EDB) negligence in safeguarding consumers.
Sources revealed that ECC had met on 10 December to discuss the auto policy draft. Its technical advisory committee had suggested deferring the proceeding, and the review was subsequently delayed.
Previously, Prime Minister Nawaz Sharif had decided to eliminate the EDB from different sections on account of multiple reports of its misconduct. The PML-N government had also accepted an auto policy that was aimed at ending the domination of local car assemblers after noting that that the companies were using outdated technology and charging premiums. It had also announced incentives for the establishment of car assembling plants in the country. Accordingly, various companies set up their plants that have now begun local production.
According to officials, a proposal was recently made to set up a price regulatory board with officials from the auto industry, the EDB, and the Ministry of Industries and Production to set car prices. Furthermore, the Minister for Industries and Production, Makhdum Khusro Bakhtyar, directed concerned officials of his ministry to consult the Law Division on the proposal.
Although the EDB had initially resisted the formation of a price regulatory board, it is currently the regulator of domestic industries, including auto manufacturers.
PTI Government’s Efforts
The incumbent PTI government is also concerned about the premium culture and the escalating car prices. The Minister for Industries had announced a reduction in prices in July 2021 after reduced duty and taxes on cars in the FY22 budget. Furthermore, the additional customs duty and federal excise duty on smaller vehicles was removed by the government.
Subsequent to the Finance Bill 2021, the government reduced the federal excise duty by 2.5 percent on all cars with up to 3,000cc engine capacity, and removed the excise duty on small cars (660cc-1,000cc), cutting general sales tax from 17 percent to 12.5 percent on cars with up to 1,000cc engines.
Minister Bakhtyar also said that efforts to boost local production by this year in the auto sector to 300,000 units are underway via various steps and incentives.