KARACHI: Auto part industry urged government to establish working-level committee headed by Governor SBP and comprising members from all related stakeholders to decide on foreign exchange allocation to automotive vendors. 

They have asked State Bank, EDB and MOIP to intervene and allocate a minimum quota of $ 13 million per month for bare minimum working of all segments of automobile sector.

Due to MOQ (minimum order quantity) limitation, a simple monthly average formula for foreign exchange allocation will not work with auto parts makers. It is, therefore, suggested to work out fund allocation based on a quarterly basis with liberty to each supplier for monthly adjustment to meet actual requirements. After clearance of backlog, imports will automatically be adjusted to 50 percent of OEM production level, they said. 

Presently, SBP is releasing foreign exchange at rate of 50 percent of 4 months average from July-2022 onward. OEMs later started receiving funds and getting their CKD consignments cleared from port. Such understanding was not available to automotive vendors and their consignments are stuck at port, hindering production of vehicles at OEMs end. A quota of $ 8.59 million is now allocated to vendors from September instead of July resulting in a shortage of parts. 

Industry wants to allocate quota to auto parts manufacturers from July instead of September to synchronise their supplies, with OEMs. Vehicles could only be assembled when both imported and locally produced components are available. Some of members found out that their quota provided by SBP was lower than 50 percent of their average imports. Upon investigation it was revealed that scheduled banks did not correctly feed data in ITRS, resulting in lesser quota allocation. Therefore, it is urged to amend quota upon correction by scheduled banks. 

CKD import curtailment has been carried out for Car and SUV assemblers, while motorcycle, tractors, trucks/buses where CKD imports are very low (about 20 percent of car and SUV segment) and allowed to import without any restriction in order to fulfill demand of agricultural and essential commutation sector.

They have demanded an additional quota of just $ 2 million for this very essential segment of auto sector. They also demanded a quota of one million dollar for import of machinery and allied equipment.  

Published in The Daily National Courier, September, 19 2022

Like Business on Facebook, follow @DailyNCourier on Twitter to stay informed and join in the conversation.