Industry pleads for urgent bailout to beat virus lows

KARACHI: Industries like auto and cement, clambering to recover from last year's lows, were in prompt need of government underpinning to hold out amid Covid havoc, an industry official said on Saturday.

“The government should step in to arrest the sharp rise in prices of vehicles and cement among other products and the only way to do that amid global surge in raw material prices is to cut the duties and taxes, to keep the prices in consumers’ range,” said SM Ishtiaq, CEO SM Engineering, talking to The News.

“Currently, the government levies account for almost 40 percent of car retail price, and almost 30 percent of cement bag prices.”

Ishtiaq said tax discounts on cement and vehicles according to different categories for a few years would help these industries carry on the growth momentum with little or no impact on the overall revenue collection as it might automatically grow with more sales despite cuts in tax rate.

“However, what the government needs is a mechanism to keep a strict check on prices to ensure the tax benefit is passed on to the consumers,” said Ishtiaq, adding that it would be a win-win situation for industries, consumers and government alike.

He further said these industries along with textiles could help revive the economy.

Cement sector was badly hit last year amid lockdowns due to covid-19, posting losses of billions of rupees. However, according to latest numbers the industry posted growth of 19.03 percent as the dispatches increased to 48.274 million tons in the first 10 months of this fiscal as compared to 40.555 million tons during the same period last year.

These dispatches are already the highest ever for a year, with two fiscal months still left.

Auto industry is also showing a massive turnaround as during the first three quarters of this financial year.

Latest stats issued by PAMA (Pakistan Automotive Manufacturers Association), show the industry has sold 112,244 passenger cars as compared to 85,330 in the same period of last year, an increase of over 31.5 percent.

The sales of two/three wheelers also picked up significantly from 1,181,685 units in July19-Mar20 to 1,438,194 units in July20-Mar21, an increase of 21.7 percent.

Analysts say the growth may take a hit any time with the sharp and unprecedented rise in raw material prices globally, as the manufacturers have been put under increasingly unbearable cost pressure which is being passed on to the consumers.

“If the trend continues, it may lead to lower sales with shrinking buying power of the consumers, especially in an inflation-hit country like Pakistan, undoing all the progress made by these sectors,” they added.