Ghandhara Tyre suspends production on inventory shortages

March 21, 2023

KARACHI: Import curbs continue to affect production activities in the country, as Ghandhara Tyre and Rubber Company Limited was the latest to announce non-production days on Monday, second time in 2023.

The company had earlier taken a production break from February 13 to February 17, citing banks’ unwillingness to issue letters of credit (LCs) for import of raw materials. In March, it has again announced non- production days from March 24 to April 3.

“Due to the prevailing economic conditions in the country and its impact on the ability of the banks to open LCs for import of raw materials has severely disrupted the Company’s supply chain and as a result, it is unable to continue with the production activities,” it said in a notice to Pakistan Stock Exchange.

The production activities of the company would resume from April 4, it added. “Also, we would continue to monitor the situation for future course of action depending upon stabilization of the aforesaid factors.”

The issue of LCs goes back to last year when measures were taken by the State Bank of Pakistan and the incumbent government to shrink the country’s import bill amid depleting foreign exchange reserves. The central bank’s reserves are standing at an alarming level of $4.3 billion as of March 10, enough to cover even less than a month’s imports.

Low FX reserves, delays in the International Monetary Fund bailout programme, and political unrest have contributed to production shutdowns by many companies. Pak Suzuki, Indus Motor, Nishat Chunian, and Diamond Industries are some of the names that have been forced to halt production activities by raw material shortages.

Non-production days by a prominent tyre maker are not good for the industry that already suffers from massive smuggling. Tyre smuggling in Pakistan causes revenue loss of approximately Rs50 billion to the exchequer, a spokesperson of Ghandhara Tyre said few months back. Smuggling of new and used tyres into Pakistan is threatening the survival of the local industry as up to 60 percent of the country’s total trye market is met through smuggled ones, dealing a huge blow to the industry and government alike, according to the spokesperson.

He was of the view that smuggling had been unabated because of lack of coordination between the concerned government authorities. Ghandhara Tyre (formerly General Tyre and Rubber Company of Pakistan Limited) was incorporated in Pakistan on March 7, 1963 as a private limited company, under the Companies Act, 1913. The company is engaged in the manufacturing and trading of tyres and tubes for automobiles and motorcycles. On Monday, the company’s scrip at the bourse closed unchanged at Rs27.50.