FeaturedNationalVOLUME 16 ISSUE # 23

Selling cars to starving people

Prices of cars have come down by Rs100,000 to Rs400,000 after the government has reduced duties and taxes on them. It is the only “relief” the common people have received after the budget. In the meanwhile, rates of motorcycles, which they can afford to purchase, have skyrocketed. Prices of sugar, ghee, and edible oil have also gone through the roof in the first month after the announcement of a “people-friendly” budget. Reducing prices of cars for people, who are struggling to make both ends meet, is like rubbing salt into their wounds.

All manufacturing companies have reduced car prices following a reduction in duties and taxes. The highest change was seen in the price of a luxury car, which decreased by a whooping Rs400,000. The government has reduced the federal excise duty on all vehicles even above 1,000cc by 2.5pc. Sales tax has been reduced on vehicles below 1000cc from 17pc to 12.5pc. The 7pc additional custom duty has been removed on cars below 1000cc and on cars above 1000cc to 2pc. A 2.5pc FED was slapped on cars below 1000cc; 5pc on cars below 2000cc and above 1000cc; and 7.5pc on cars above 2000cc. Prices of all cars have come down by 2.5pc.

The government has slashed prices of cars, which the common people cannot purchase. On the other hand, rates of motorcycles, which they can afford to buy, have risen sharply in recent months. Taking advantage of soaring demand, a leading company has hiked prices of its products for the fourth time in 2021. It has increased prices of motorcycles by Rs1,600 to Rs3,000, despite bearing a low import cost on the back of appreciation of the rupee against the dollar. The company has jacked up prices by Rs6,600 in just four months.

On the other hand, prices of sugar, ghee, and edible oil have risen sharply. Companies have jacked up the prices of edible oil and ghee unilaterally. The price of “first-class” ghee has jumped by Rs38/kg. It is selling at Rs343 from Rs305. “Second class” ghee witnessed a Rs15/kg increase. Its packet is now being sold at Rs285/kg as compared to its previous price of Rs270/kg.

After the price hike, the Competition Commission of Pakistan (CCP) raided the offices of the Pakistan Vanaspati Manufacturers Association (PVMA) in Islamabad, Karachi and Lahore and seized records for their involvement in suspected anti-competitive activities. According to the CCP, it launched an investigation into suspected anti-competition activities in the edible oil and ghee sector. The record will provide evidence of the possible role of the association and other companies in the recent rise in edible oil and ghee prices. Last month, the Pakistan Vanaspati Manufacturers Association (PVMA) had written a letter to Prime Minister Imran Khan and Finance Minister Shuakat Tarin, informing them that prices of edible oil would increase by Rs13 to Rs18/kg from July 1. It cited “new taxes” in the budget for the increase in edible oil prices.

The price of sugar has also increased from Rs94/kg to Rs100/kg in wholesale markets. A 5kg sack of sugar is selling at Rs500 as compared to its previous price of Rs470. It is a fact that the government has failed to check the prices of sugar and wheat flour in its three-year rule. Rates of other food items also change on a daily basis. The Sensitive Price Indicator (SPI) for the week ended July 8, recorded an increase of 0.07pc over the previous week due to an increase in the prices of food items including tomatoes (11.51pc), garlic (8.31pc), onions (4.85pc), sugar (2.60pc), potatoes (2.04pc), and eggs (1.67pc), according to the Pakistan Bureau of Statistics (PBS). The year-on-year trend shows an increase of 12.28pc with most rates of the items increased mainly electricity for q1 (61.62pc), chili powder (37.29pc), mustard oil (36.48pc), gents sandal (33.37pc), LPG (30.91pc), vegetable ghee 1kg (27.53pc), gents sponge chappal (25.13pc), cooking oil (24.21pc), match box (23.44pc), and eggs (23.35pc).

The government has also increased regulatory duties on the import of essential food and non-food items and luxury goods, including up to a 240pc hike in import duties on mobile phones for additional Rs27 billion revenues in the new fiscal year. The new regulatory duties came into force from July 1, the first day of the new fiscal year, according to a notification issued by the Federal Board of Revenue (FBR). The regulatory duties on the import of mobile phones have been increased in the range of 32pc to 240pc, depending on the cost of the phone. A simple handset of just $30 will now attract Rs300 – up by Rs135 or 82pc. A smartphone of less than $30 and a regular phone of value between $30 but not exceeding $100 has been slapped with Rs3,000 duty – higher by Rs1,380 or 85pc, according to the notification. A mobile set of $100 to $200 will attract Rs7,500 duties – up by Rs5,070 or 208pc – the second highest increase for a set normally used by middle income groups. A set above $200 to $350 will attract Rs11,000 duty – an increase of Rs7,760 or 240pc – which is the highest increase both in absolute and percentage terms.

The government has failed to check prices of essentials and food items but it has slashed taxes on cars. It aims to appease urban voters, who can buy vehicles. It should have provided subsidies on sugar, flour and oil/ghee to bring down their prices to provide meaningful relief to the common people. Prices have gone beyond their reach in the PTI government. It will be a great achievement of the government even if it controls sugar, flour and oil/ghee rates. All claims of economic prosperity are false if their benefits do not reach the common people.