KARACHI: The annual consumption for automotive tyres in Pakistan is around 14 million and half of the demand is met through smuggling, said Hussain Kuli Khan, chief executive officer of Ghandhara Tyre and Rubber Company Limited (formerly known as General Tyres).

He said around 15 per cent demand is met by domestic production, while the remaining 35 per cent tyres are imported legally.

According to an estimate, the tyres smuggling alone is costing the national exchequer over Rs40 billion annually, he said, while talking to BOL News.

Smuggling of tyres witnessed a decline at the beginning of the last year because of the Covid-19 pandemic. But since August 2021, it has been on the rise.

The government should protect the local industry and national treasury from the damage caused by smuggling, he said, adding that the industry demands effective measures to curb the smuggling, improve the competitiveness of the local industry and to provide equal business opportunities.

Currently, the industry is facing a supply and demand gap and this is due to heavy under-invoicing and smuggling. These are the reasons the local industry is not flourishing. Therefore, the local industry asks for a level-playing field, as it would raise the tax revenue and also create employment opportunities in this testing time, Khan said.

Hussain Kuli Khan is an accomplished professional with substantial and diversified managerial and leadership experience of over 25 years in the manufacturing sector.

He started his career in the textile sector and then moved to the tyre manufacturing industry where he was trained at the Continental AG of Germany Plants in Europe.

He has served various trade and industry associations in senior positions. Besides, he also remained executive finance and executive director finance from 1997/2006 at JDM Textile Mills Ltd.

In 2003, he was elected as the chairman of the All Pakistan Textile Mills Association (Aptma) Khyber-Pakhtunkhwa and Aptma’s central body vice chairman. Inheriting key leadership and entrepreneurial skills and attributes from his family, Khan is in receipt of Business Administration qualification from Gettysburg College, US and attended several professional programmes in Europe. Khan is also a certified director of the Pakistan Institute of Corporate Governance.

To get insight about the manufacturing of tyres, BOL News talked to Hussain Kuli Khan.

Brief us about the local tyres manufacturing industry

The local tyres industry is quite capable of growing and supplying tyres to the market. Currently, the annual consumption for automotive tyres in Pakistan is 14 million and around 15 per cent demand is met by domestic production, 50 per cent through smuggled tyres, while 35 per cent of the tyres are being imported legally.

What is the contribution of the local tyre industry?

The local industry is playing its role in providing revenue to the national exchequer along with providing employment as GTR alone contributes over Rs3.20 billion annually to the national kitty.

What are the challenges being faced by the local industry?

Currently, the industry is facing a supply and demand gap and this is due to heavy under-invoicing and smuggling. These are the reasons the local industry is not flourishing. Therefore, the local industry asks for a level-playing field, as it would raise the tax revenue and also create employment opportunities in these testing times.

Interestingly, the local industries, which are manufacturing farm and motorcycle tyres have contributed heavily in terms of taxes and employment generation owing to the nonexistence of imports.

What is the biggest challenge?

Smuggling. I tell you that smuggling should never be a viable option to meet the demand of a country. In fact, it cripples the local industry and cheats the government in terms of its legitimate revenues, which should never be tolerated.

According to an estimate, smuggling of tyres alone is costing the national exchequer more than Rs40 billion annually. The government should protect the local industry and the national treasury from the damage caused by smuggling.

What measures do you suggest to curb smuggling?

The smuggling of Indian tyres are also on the rise via Torkham, Chaman and Taftan borders and with over 90 per cent of the border being fenced, the tyres are only coming through the border check-posts. Though the Federal Board of Revenue (FBR) has improved enforcement by taking strict measures at the Customs level, a lot more effort is required.

Also, it is necessary to check the stock in the markets and take action against the sellers by confiscating the illegally imported tyres.

How is Afghan Transit Trade affecting the local tyres industry?

The items under the guise of Afghan Transit Trade (ATT) are either unloaded in Karachi or returned from the Afghan border via smuggling.

The government should reevaluate the data of the items being imported via the ATT and see if the numbers of tyres being imported are supported by the vehicle population in Afghanistan. This needs to be addressed and the Customs department should ensure that this facility is not misused.

What is your take on tyre import?

Legal tyres import is on the decline due to the State Bank of Pakistan’s (SBP) requirement of 100 per cent cash margin and market volatility. In the last six months, the legal tyres import has dropped 23 per cent.

In your opinion what are the reasons for increase in prices of the locally-manufactured tyres?

The prices of tyres have been affected by a number of factors, including a rise in the prices of the global raw materials, supply chain disruption because of the Covid-19, rupee depreciation and increase in the tariffs for utilities.

The raw materials used in tyre manufacturing have increased around 25 per cent; the pandemic has disrupted the global supply chain and delay in shipments, while the fares and prices of containers also shot up because of the shortage.

The rupee depreciation against other foreign currencies is another big reason for the increase in prices; and the higher utility prices have also impacted the industry as a whole. Owing to natural gas outages they are forced to use expensive alternative fuels. However, it is not correct that the drive against smuggling is the reason for the price hike.

What do you suggest to the government for reducing the budget deficit?

The decision makers can reduce the budget deficit without abolishing subsidies by only controlling the huge damage the smuggling of goods is doing to the national economy. The illegal trade and smuggling of some key products, including tobacco, tea, lubricants, and automobiles spare parts, medicines and tyres cause huge losses to the national treasury.