LAHORE: Controlling imports is essential; but curbs should be rational and not generalised. Increasing duties is tolerable but cutting all raw material imports by 50 percent through administrative measures impacts production of those products where localisation is very high.
One can understand curbs on import of components by car manufacturers (in view of dwindling sales they have not protested the curbs). The foreign exchange needed for components used in car assembling in almost all cases is higher than the locally produced components.
But there is no justification to curb nominal import of motorcycle parts of a manufacturer that has invested heavily in its plant to ensure that almost 99.5 percent of the parts, including the engine are produced locally. That manufacturer has the capacity to produce 1.5 million bikes locally.
With current curbs, the production of bikes has dipped by 50 percent. This is irrational.
Why bracket the manufacturer that has achieved almost 100 percent deletion with those that consume more foreign exchange than those produced locally. This curb is justified for those bike manufacturers that import most of the components to assemble their bikes.
Had the company with almost 100 percent localisation been exempted from the curb, it would have encouraged other manufacturers to go for rapid localisation. Same is the case for some tractor variants that have achieved 90 percent deletion.
There should have been no curbs on the import of components of those variants. Tractors are acutely short in Pakistan, and we need to facilitate at least those tractors where foreign component is nominal.
Economic planners acted in panic when they decided to apply curbs on all raw material imports. It was essential to carry out a study to find out the impact of these curbs on employment, production, and possible shortages in the market.
Pakistani manufacturers had a hard time in procuring imported components and raw materials after Covid-19.
The transportation cost increased beyond imagination.
In fact, in many cases the cost of the component was much less than the transportation cost incurred on them. To tackle this situation, many manufacturers started looking for local vendors.
The capable local vendors already were producing components for many sectors, including auto-industry and had no capacity to oblige other sectors.
It was in this context some home appliances manufacturers decided to invest heavily in producing as many components as possible of air conditioners, refrigerators, and other appliances locally.
Two big manufacturers of home appliances are currently producing most of the plastic and steel components locally.
Their import bill has gone down drastically because of heavy investment they made on the import of the machinery that made these parts.
Now, with curbs on import of remaining few components has penalised those that invested heavily in localisation. They are treated at par with those assemblers that depend totally on imports.
Planners could have studied the imports incurred per unit (air conditioner for instance). Then based on last year's imports, the permission could have been halved.
Currently, the curbs are based on the number of components imported last year. A study would reveal that the assemblers that depend 100 percent on imports are much higher than those that produce more components locally.