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Higher cost jacks up tyre prices; 30% surge since July

Higher cost jacks up tyre prices; 30% surge since July

Higher cost jacks up tyre prices; 30% surge since July
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KARACHI: There has been a significant increase in the tyre prices due to higher cost of production/import emanating from depreciating rupee, increase in regulatory duty by 10 per cent to 25 per cent and an increase in the Customs valuation, the predetermined value on which the taxes are imposed. Moreover, lesser inflows of smuggled goods also impacted the prices.

According to a distributor of Bridgestone Tyres, the total increase in the cost of imported tyres was around 30 per cent since July 1, 2021. Only 20 per cent of the market demand is met through local manufacturers, 30 per cent by importers and a staggering 50 per cent by smuggling.

The cost of raw materials used in the tyre manufacturing has increased 25 per cent in the last six months, which is the main reason behind the current increase in the prices of new tyres.

“The prices of tyres have been affected by a number of factors, including increase in the global raw material prices, supply chain disruption because of the Covid, rupee depreciation and an increase in utility prices,” a spokesman for the General Tyre said.

“The pandemic has disrupted the global supply chain and delay in shipments is quite frequent these days, while the prices of containers also shot up because of the shortage.”

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The rupee depreciation against other foreign currencies, and higher utility prices have also impacted the industry, as a whole. The utility companies had already announced gas supply suspension to non-export industry; therefore, they are forced to use expensive alternative fuels.

Imports are currently down because of the volatility in the currency market and the government’s demand of 100 per cent advance payment on letters of credits.

“Smuggling should never be a viable option to meet the demand of a country, as they both cripple the local industry and cheat the government in terms of its legitimate revenues, which should never be tolerated,” the General Tyre spokesman said.

The local tyre industry was capable of growing and supplying tyres to the market, he said.

“The current gap is due to heavy under-invoicing and smuggling, which are the reasons the local industry is not flourishing.”

The federal government and Pakistan Customs are pursuing a rigorous anti-smuggling campaign. An official said inflows of non-tax-paid goods from the borders was reduced significantly, which was evident in the record revenue collection on legitimate imports in the last quarter.

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It is not correct that the drive against smuggling was the reason for the price increase as through these efforts the government has attracted investment and, as a result, foreign manufacturers are setting up plants in Pakistan.

“The local industry asks for a level-playing field as it would raise tax revenue and also create employment in these testing times,” the spokesman said, adding that the same has been done by the local industry in the manufacturing of farm and motorcycle tyres where imports are nonexistent.

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