Automark May 2011 by Mustafa Hanif

AUTOMARK MAGAZINE

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Editorial

MONTHLY

The Magazine for Pakistan Automotive Sector

May 2011 Vol 4, Issue 05

Earth Day and Pakistan

International Mother Earth Day on April 22nd may be the only event celebrated in unison by all the nations of the world. Founded by United States Sub Editor : Dr. Raja Irfan Sabir Asst. Editor : Sumaiya Rizvi Senator Gaylord Nelson in 1970, this day celebrates and recognizes Earth for both the gifts she bestows Contribute Writers : Syed Mansoor Ali and the responsibilities she imposes upon her Asif Masood Ali Hassan inhabitants. So how should Pakistan contribute to Mohammad Owais Khan the global initiatives designed to safeguard the Omar Rashdi rapidly deteriorating natural environment we all Muneeb Jawed depend on? Advisor : Imtiaz Rastgar Today, Pakistan attempts to fulfill its responsibility CEO, Rastgar Group & during Earth Day by sponsoring extravagant CBI External Expert advertisement campaigns that promote trendy Islamabad initiatives such as recycling and the use of energy Abdul Majeed Sheikh efficient light bulbs. An untold amount of resources President, are spent in these efforts but at the end of the day AOTS-ABK Dosokai, what is really accomplished? The brilliantly lit Karachi Regional Center. wedding parties and wasteful trash disposal practices Consultant (MME), continue unabated. On April 23rd, Pakistanis simply NED University - Karachi go back to their normal lives and normal destructive Syed Mansoor Ali habits. The advertisements are falling on deaf ears. Business Manager Can Pakistan afford to make such ineffective Case NewHolland investments? Pakistan In light of challenges such as those discussed by Saeed Shah in the article “Earth Day energy crisis: J. Pereira General Manager Pakistan plans shorter work week, curfews” Product Support Division (McClatchy Newspapers 2011), we cannot afford to Al-Haj FAW Motors (Pvt) Ltd. waste a single rupee allocated to solving our Karachi environmental issues. If Pakistan is to tackle these problems, we must dispense with the futile Engr. IHT Farooqui advertisements and implement real, concrete General Manager Plant Karakoram Motors (Pvt) Ltd., solutions. If we want citizens to recycle, public Karachi recycling programs must be set up and possible incentives for recycling should be considered. If Circulation Manager : Abdul Khaliq we want to reduce carbon emissions, a more reliable public transport system should be set up. This would Graphic Designer : Mustafa Hanif have the additional benefit of reducing our dependence on foreign oil. Unl ike useless advertisements that no one stays mindful of for more than a day or two, these public projects would Postal Address Active Communications have a real and positive effect on the environmental D-68, Block-9, Clifton,Karachi problem. Such initiatives hold the true potential of Visit us: www.automark.pk resolving our problems such as the energy crisis E-mail: magazine@automark.pk being faced as opposed to talking about conserving automarkpk@gmail.com energy by turning off power for an hour in a nation Tel/Fax : 021-32218526 Mobile: 0321-2203815 that faces a minimum of eight hours every day without power. Editor :

M. Hanif Memon

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CONTENTS Your trust is our success

Automotive,Agricu lturer, Engineering & Energy Sect or

An Exclusive Interview with Kalim A Siddiqui

08-10

Pakistan Energy Crisis Exclusive Article by Asif Masood

40-41

More pressure on Chinese bike makers ahead of budget 2011-2012 Exclusive Article by Ali Hassan

11-13

Differential Exclusive Article by Omar Rashdi

42 45

Car makers, vendors pin hopes on new budget, seek long term policy Exclusive Article by M. Owais Khan

15-16

Proposals for Budget 2011-2012 By APMDA CarsS, What Future? Part-1 by Syed Haider Mehdi from NED University

Energy Conservation in Agriculture would help Pakistan prosper Exclusive Article by Syed Mansoor Ali

16-18

Local assembled car price list

47 49

Team Infinity - The Power of Green By Majid Mahmood from GIKI

Honda City - Great Features by Muneeb Jawed from NED University

Challenges of the oil refining sector Exclusive Cover Story by M. Owais Khan

24-25

Local assembled car price list

Motorcycle Price List - Updated in April-2011

50-51

J. Pereira appointed Vice Chairman of FPCCI’s 27 Standing Committee on Science - Press Release The Uncertain Future of the Auto Industry by Sumaiya Rizvi

e-magazine Issue at our website

Important Announcement The management of the monthly Automark magazine is pleased to announce that Ms.Sumaiya Rizvi has joined the Automark editorial team from May-2011. She will be work as assistant editor for our magazine, Sumaiya Rizvi completed her B. A. in Anthropology (2009) from Grant MacEwan University in Edmonton, Alberta, Canada. She is getting a second B. A. in Religious Studies from the University of Lethbridge in Alberta. At this institution, she is also a part of the co-operative education program, which allows her to supplement her education with practical work experience. As part of this program, she has worked for the University of Lethbridge Vice-President Research and the Office of Research Services as a writer and editor for their website. She is currently completing a work-term for the Department of Foreign Affairs and International Trade (Canada) as an Information Management Operations Technician. She has a versatile background as her work experience ranges from having worked in the customer service industry to academia and the health care field. Ms. Rizvi has developed a keen interest in the fields of globalisation, transnationalism, religion, gender issues, international human rights, and migration. She enjoys conducting both primary and secondary research, writing, and editing papers, which led to her joining our publication. She has previously published an article on “Blood Sacrifice in Hinduism” on the scholarly resource website Mahavidya: Great Wisdom. The lead publication of the Pakistan automotive,Agriculturer,Engineering & Energy sector, she will make contributions to further improve the quality of our publications and bring it at par with other international magazines of the automotive industry.

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Face to Face

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An Exclusive Interview with Kalim A Siddiqui, President Petroelum Marketing Business of Byco Pakistan by Hanif Memon Siddiqui touched upon various topics ranging from Byco 's tre me ndous performance to burning industry issues and the company's future plans. He sees the company to be the third largest in the industry in two to three years. Following are edited transcripts of the interview:

Q – Please tell us something about Byco Petroleum? A- We have started Byco’s marketing activities very aggressively since the last 2 years. He said that currently the company has a network of 204 stations in all four provinces in Gilgit-Baltistan and Azad Kashmir and if everything goes fine, it would have a network of 250 stations by June 2011. "We also plan to add 100 more retail stations in year 2012", he added. Two years back we were ranked 10th or 11th in the league of oil marketing companies but now we are ranked 6th while we are working on different options which would soon ensure 5th

position for Byco in the industry. He said that overall market share of Petroleum Marketing Business (PMB) of Byco in petrol, diesel and furnace oil has jumped from 0.7 percent to 2.7 percent. "We are pursuing a robust growth strategy with aggressiv e network expansion and innovative marketing strategy which has resulted in improvement in our market share”. This is a robust growth and we have taken over some market share of other oil marketing companies (OMCs) with th e help of ou r aggressive and i nnova tive mar ket ing stra tegy. Recently, our company had started its terminal in Kemari and now it is the 4th oil company to have this terminal facility in Kemari. This is connected for imports with its jetty and the first jet fuel cargo has also arrived. Currently, the ready capacity of this terminal is 11,700 tons but the company is working to further increas e its capacity. In Pakistan, we are the fourth company after PSO, Shell and Chevron to start

About Kalim A. Siddiqui, President Petroleum Marketing Business He is a Chemical Engineer by profession and has completed his education from United Kingdom. Initially joined Caltex and worked there for almost 20 years. After that, he was hired by PSO where he served at various management positions for a couple of years. He was the Managing Director there before joining Byco. Currently, He is working as the President, Petroleum Marketing in Byco. He was part of the board of management at PSO and PRL and now he is a member of Board of Investment (BoI). He has written many un-official papers for the government and the authorities have considered his opinions and solutions. our own facil ity to store jet fuel. We have also marketed LPG cylinders and are now working on auto gas business, we plan to build auto gas terminals at our stations. We have LPG cylinders with Byco brand

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Face to Face name for the end users; soon we will also bring the commercial size of the cy linder which is 45 kg. We hav e already introduced the small cylinder which has the capacity of 11.4 kg.

Q - What are Byco's plans for the lubricants segment as it is a relatively higher margin business? We al re ady have a Byco-branded lubricant product line with large packaging already in the market. We are now working on the small packing, which will soon be in the market which will cater to a lar ger segm ent. When we asked him about the market size an d future requirements of lubricants in the country, he said that we have an extra advantage of our existing petrol pump network which is a good market place for us and we also distributed and will do our marketing to other places. We don’t have to sell any other brand at our outlets and we already have the place where customers are coming to purchase lubricants, so instead of selling other brands we are planning to sell our own Byco branded lubricants. We are also bringing industrial lubricants for our valuable customers. He said that market is always saturated

directors of the state-owned oil and gas companies from their jobs, and the boards of directors of each of these companies have a l so b e e n r e m o v e d a n d reconstituted. What is your personal opinion regarding this move? A – I am not satisfied and convinced with the government’s move, according to me, most of the managing directors were appointed by the curr ent government during the last three years, maybe they were appointed for political reasons or not, but now the government is saying that are not up to the mark and not competent for their jobs, this me ans that if they hav e failed to com p let e t he ir job s t h en th e government has also failed. They should not have been removed all together at the same time. By doing this the government did not get any benefit. Instead of removing all officials at the same time, it should have been done in steps. This move will not resolve any problem and will increase more energy and administrative crisis. He strongly criticized the government’s move and said that in last three years 7 federal petroleum ministers were

blame the current government for this crisis only. None of our pre vious governments, even from last 60 years have taken any serious action and none of them have made a long-term plan for this very important sector of the country. They should make small and big dams like India and other countries in this regio n, right now every sector of Pakistan is in crisis and this is all due to bad governance and lack of planning. Pakistan has all the resources: we have one of the biggest deposits of coal in the world, more than Saudi Arabian’s petroleum deposit. We can produce energy and power not only for our use but we can al so export it to other co untrie s. Unfortunately, al l the governments have their own agendas and they do not have any concerns regarding these issues.

Q – How Pakistan can overcome this Energy Crisis? A – To handle this crisis in not an easy task and no one can resolve this issue overnight. To resolve this problem and get out of this situation we have to start from scratch. This government has to take some measurement and start a new project for energy because this new project will not provide output in short

We already have a high borrowing cost in Pakistan, then there is circular debt and the cost of doing business in Pakistan - all these things combine to make it difficult for the sector to stay afloat. So our margins in real terms are in the negative zone. We urged the government to resolve the circular debt crisis and increase oil refinery margins. but as new entrants we have to work hard and it is our firm belief that due to our high-quality product, we would manage to create our place in the market. We have already launched three fully loaded mobile quality vans to check quality and quantity of petroleum products at our outlets. These mobile teams would pay surprise visits to ensure best services.

Q – Few days back government removed all of the managing

replaced and this important petroleum sector of the country cannot cope with the crisis which will become even worse in the next few years. If current government does not take serious measures we don’t know how we can run this country without electric and petrol.

Q – In recent times, suddenly we have a very bad energy crisis, what do you see of all this ? A – I would say to a certain extent this did not happen suddenly, I would not

time it will also take minimum five to six years. We have to make long-term, energyfriendly policies and make some sort of law that all upcoming governments should continue to follow. In our country every new government makes their own policies and does not own the previous governments’ road map which is mainly why the problems are getting worse. Since a very long time, our governments are talking to Iran for purchasing the

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Energy Sector - Event Update

Celebrating Byco’s New Jet Fuel Terminal Byco, the fastest growing OMC in Pakistan, achieved another milestone by successfully inaugurating its first Jet Fu el T er minal i n Keama ri “Universal Terminal Limited”. The launch event was held in PC hotel, Karachi on 13th April. This state-ofthe-art termi nal exceeds the latest safety standards and is designed for rapid disbursement of product through multiple points into a single tank lorry. Seen in the large photograph is Ms. Nasreen Haque, Chairperson KPT receiving the memento from Mr. Amir Abbassciy (CEO, Byco Petroleum). Also seen in the photograph are Mr. Kalim

A. Siddiqui (President, Byco Petroleum) and Mr. Mansoor Rashid (CEO, UTL).

The smaller photos capture their presentation sessions.

Byco Celebrates the Establishment of 200 Retail Stations & Launch of Branded Tank Lorries Byco, the fastest growing OMC in Pakistan, now has a strong network of over 200 retail stations across the nation. The celebratory event was held at Carlton Hotel, Karachi on 30th April. Mr . A mir Ab bassciy, CEO Byco Petroleum and Mr. Kalim Siddiqui, P r es ide nt B yc o P et r ol eum , congratulated all the employees on this r e m a r ka b l e a c h i e v em en t a nd enco uraged the team to continue working w ith the same zeal and dedication. Byco has achieved this milestone in a short span of time. The event also marked the launch of Byco’s newly-branded tank lorries. These state-of-the-art vehicles, with enhanced safety and security measures now ply on the roads across the nation. gas and laying down the pipe line but sti ll noth ing h as m aterial ized. Sometimes they want to purchase gas from Tajikistan but nothing has materialized from this deal also. Due to the lack of not taking any serious decisions we did not reach anywhere. Government should carry out long term planning with continuity in policies and a broader vision. It should put emphasis on developing and incorporating new technologies and ideas that would strengthen the economy and provide stability to the country. If we all work with honesty and integrity and give the required dedication towards the needs of our country, I strongly believe that

In the large photograph with the newly-launched tank lorry are the team members of Byco alongwith with the senior management. In the smaller photos (L to R): Mr. Amir Abbassciy (CEO, Byco Petroleum) and Mr. Kalim A. Siddiqui (President, Byco Petroleum)

we will not need any assistance from IMF or any other international aid agencies. If you want this industry to grow and prosper, you have to show consistency in policies and take the stakeholders o nbo ar d on ma j or d ec isi on s. If serious attention is not paid to this issue we will be in more problems in the coming years.

Q – According to the news, Byco has to pay about Rs 5.5 billion to OGDCL what you will say about this? A – Yes, we have to pay this amount to OGDCL and th ey have alread y suspended our supply, this is all about

circular debt. We already have a high borrowing cost in Pakistan, then there is circular debt and the cost of doing business in Pakistan - all these things combine to make it difficult for the sector to stay afloat. So our margins in real terms are in the negative zone. We urged the government to resolve the circular debt crisis and increase oil refinery margins. Both these steps will help reduce the country’s reliance on refined oil imports. Government departments are the biggest defaulters in the debt build-up. The government should immediately restructure the power sector and make it more efficient....

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Motorcycle Sector - Exclusive Article

By Ali Hassan

More pressure on Chinese bike makers ahead of budget 2011-2012 All over the year our many members always have been continuously approaching the EDB office for the issuance of importable lists / allocation of quota but the EDB did not issue approved importable and not allocating quota for the import through PRAL Chairman APMA, requested the EBD to withdraw the suspension letters and direct the PRAL not to block the import and allow clearance of the items importable according to the law and also send the copy of withdrawal letters to PSQCA for the issuance of our member licenses. T h e Eng ineer i ng Development Board (EDB) has continued t o i rk t h e l oca l Chinese bike makers and this time it has su spe nde d the production certificate of some assemblers ahead of new budget. The EDB had sent letters to the APMA members in January and February 2011 suspending the certificate under SRO 656 (i)/2006. The Association of Pakistan Motorcycle Assemblers (APMA), a body of Chinese bike makers, in reply to EDB said that without prejudice to the above in para 2 of your letters the EDB has alleged that many of APMA members are not directly importing the CKD parts and are taking input from the commercial im por ter s for t he assem bly of motorcycles. APMA added that this is clear allegation on EDBâ&#x20AC;&#x2122;s part without any basis. APMA chairman Mohammad Sabir Shaikh said its members had already sent many letters to your department for th e i ssu ance of p rod uc tion certificates including importable lists / allocation of quota for the year 2010-11 valid up to 30-06-2011, but the EDB had neither responded the said letters nor corrected the said certificates. As a result, EDB had issued letters to many assemblers suspending their certificates

office had not issued approved importable lists at the first week of every finan cial year. The EDB staff approved the lists at the end of the year, while next year EDB starts d emanding input records from the assemblers as per approved importable lists. on the basis of non submission of documents / lists. Due to suspension letters issued by the EDB the Pakistan Standard Quality Control Authority (PSQCA) had stopped renewal of licenses for the last five months. Acco rding to SRO No. 656/2006 Amendment dated 11-06-2008, the assembler or the manufacturer shall directly import the components as per the duly approved list for import to all assemblers every year. But the EDB

Automark Magazine | May-2011 11

APMA chairman said how it is possible because EDB approved lists providing in the end of financial year and the assemblers are importing parts during financial year, before issuance of approved importable lists. Due to non issuance of lists within the time reckoned, this discrepancy arose, which violation on the part of EDB, the manager tariff, DGM Tariff, and the GM tariff for which we cannot be panelized. These facts have been brought in your kind notice of and on verbally and written as well, but failed to yield fruitful result. The situation mentioned above is alarming and the EDB is not issuing the import list at the beginning of the financial year issue the lists as and when

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Motorcycle Sector - Exclusive Article

Sabir Shaikh has suggested the government to reduce the GST to 10 from 17 per cent while special excise duty rate be cut to zero from 2.5 per cent in order to facilitate the poor segment of the society. The APMA seeks 45 per cent CBU duty on up to 1,500cc bike in 2011-2012 from the current 65 per cent, 35 per cent duty on 151cc to 400cc bikes, 30 per cent duty on 401cc and above bikes, 20 per cent duty on CKD/non localized parts, 20 plus 20 per cent duty on CKD/localized parts, 20 per cent duty on sub assembly (IORC required by EDB), 15 per cent on component (IORC required by EDB) and 15 per cent duty on sub component (IORC) required by EDB). you desired for the reasons best known to EDB, how a person can import the items as provided in belated list is a common question to answer by the EDB. According to revalidation certificates up to 30-09-2010 (the first quarter of financial year), the APMA members are fu lfilling all th e cond iti ons as enumerated in para 2 and 3 of the certificate and no where any violation has been pointed out and penalty clause exist in the certificate as well. Under these cir cu mstances th e suspension letters issued is without any jurisd iction and smells malafide intention of EDB. Sabir Shaikh said as per information the EDB is issuing importable lis ts / allocation of quota under Inte rdepartment Technical Committe e (IDTC) which are created by EDB and manager tariff, DGM Tariff, GM Tariff and GM Policy of EDB are the member of this committee. What does it mean that the committee is deciding for the issuance of importable lists / quota to assemblers and EDB people are the member of this committee. He asked the EDB not to make a jo ke of assemblers and facilitate them otherwise it will lead to destruction of small and medium motorcycle industry of the country. He said all over the year our many members always have been continuously approaching the EDB office for the issuance of importable lists / allocation of quota but the EDB did not issue approved importable and not allocating quota for the import through PRAL. He asked the EDB to approve importable lists / allocation of quota for all assemblers in the first week of every financial year. If this practice becomes a reality every assembler will import their CKD through PRAL as per EDB requirement.

He requested the EBD to withdraw the suspension letters and direct the PRAL not to block the import and al low clearance of the items importabl e according to the law and also send the copy of withdrawal letters to PSQCA for the issuance of our member licenses.

PROVISION OF ANNUAL PRODUCTION PLAN FOR ALLOCATION OF QUOTA FOR THE YEAR 2011-12 During the year 2010-11, EDB has informed the assemblers on April 22 that it has allocated quota of importable comp onents to the fir ms on the parameters decided by th e InterDepartme nt Technical Committee (IDTC) of the EDB, based on previous year's (2009-10) quota, imports and productio n/ consumptio n etc and wherever the companies approached EDB for enhancement in the quota, whether based on increased production or consignments of imports arrived, quota was enhanced. It has, however, been observed that except for a few, largely the firms have approached / continuously approaching EDB for enhancement in quota at the time when their consignments arrive at the port. At this stage, the firms starts correspondence with EDB for urgent enhancement in quota and its uploading

on PRAL's OCS by raising the issues of delays and demurrages. This not only increases the work load of EDB but also causes production losses to-the units. In order to smooth working of OEMs and save them from unnecessary hassles it has been decided to collect annual plan of production to allocate quota during 2011-2012. In this regard, assemblers are requested to kindly provide product/ brand-wise plan of production for the year 2011-12 latest by June 10, 2011 as per encl osed proforma. It may, however, be ensured that the projected/ planned figures for the year 2011-12 are based on previous year's production / consumption, orders in hand, and is prepared keeping in view the economic indicators & market.

Pre Budget Proposals of APMA

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Motorcycle Sector - Exclusive Article

EDB had issued letters to many assemblers suspending their certificates on the basis of non submission of documents / lists. Due to suspension letters issued by the EDB the Pakistan Standard Quality Control Authority (PSQCA) had stopped renewal of licenses for the last five months on sub component (IORC) required by EDB). On implementation of five year tariff plan, APMA believes that CKD rate should be increased to 20 from 15 per cent, CBU rate should be reduced to 45 from 65 per cent and additional duty under SRO 693/2006 be reduced to 32.5 to 100 per cent of equivalent rate on non localized CKD rate of duty.

To avoid the registration of non approved vehicles the government is requested to take measures to stop this violation and evasion of duty and taxes. On exports of motorcycles by small bike units, APMA urged the government to release duty draw back as early as possible to all small and medium sized exporters who have completed all formalities of the required departments. To develop export

markets the government needs to support through funding for development of distribution networks and establishment of brand name exercise. Sharing of cost is also requested. Re q u i r em e nt fo r i ss u a nc e of manufacturing facility certificate every year is only for auto industry whereas oth er i nd u st r ie s ar e enj oy in g concessionary regime without such requirement. APMA said that SRIO 656 needs to be amended for either such req u ir em ent of m a nu fac tu r in g certificate has to be deleted or it should be issued for five years after physical visit of respective OEM manufacturing facility instead of every year. On submission of data of local purchases by OEM on annual basis, APMA said SRO 656 needs to be amended and submission of data of local purchases to be eliminated. On restriction of purchase on local items from commercial importer s, the

Association seeks amendment of SRO 65 6 in ord er to elim inate su ch restrictions. On the issue of difficulties in list verification, APMA said a standard list needs to be developed by the EDB in consultation with the Associations for all items used in producing a respective automobile which shall be classified between indigenous and non indigenous for duty purposes. Such standard list needs to be issued to OEMs on annual basis with their specific capacity/last year production. Then there will be no need for obtaining such list from the O E M s a n d t h e i r v eri fic at ions/ c orr ec tio ns. As a consequence of which EDB also does not require additional strength . On short deadline for submission of annual consumption data by OEM, APMA said deadline must be extended up to September 30.....

Motorcycle tyre makers want under-invoiced imports checked The domestic manufactu rers of mo torcycl e tyres an d tubes have appealed to the government to check under-invoiced imports of these items. Da t a g a t h e r ed b y t h e l o c a l manufacturers shows that 16,820 tyres of size 2-25-17 were imported in 2010 at a minimum price of $1.37 and a maximum price of $3.21 with an average price of $2.27 per tyre. Chairman Service Industries Limited Arif Saeed said that his company exports the same tyres at ex-factory rate of $6.60 per tyre which is almost three times the price at which these tyres are imported in the country. “Imports at such low rates confirm that massive under-invoicing has taken place,” he said, adding that this price does not cover even the cost of raw material used in these tyres. He said the raw material including rubber and vital chemicals alone costs

$5.28 per tyre. Muhammad Ejaz, marketing head of a leading motorcycle tyre manufacturer, said that the demand for motorcycle tyres has picked up rapidly in the country as over 3 million tyres are needed annually for the 1.5 million two wheelers that Pakis tan produces annually and at least 1.5 million more tyr es ar e need ed annu all y for replacement in old motorcycles. He said that despite massive underinvoicing, the imported tyres have failed to make a dent in the sales of local motorcycle tyres. “The customer remains loyal because of better quality of local tyres.” But, he said, it is preventing increase in sales, which could have helped them expand capacity to boost exports. Saeed said size 2-50-17 is imported at an average rate of $2.1 while the exfactory export price of Pakistani tyres

Automark Magazine | May-2011 13

of same size is $6.89. The tyre of size 2-75-17 is imported at average rate of $4.08, while the exfactory export price of local tyre of same size is $9.38 and the cost of raw material used in this siz e of tyre is $7.85. He said the raw material costs are the same for manufacturers in other countries, so they cannot sell their products at such low rates. Ejaz said rampant under-invoicing is also going on in the import of scooter tyres, trolley tyre and rickshaw tyres. He said val uatio n d epartment of Customs has been informed about these practices and provided documentary evidence, but it has taken no action. He said 599,571 motorcycle, scooter, rickshaw and trolley tyres were imported in 2010 th rough massive under invoicing, causing the exchequer a loss of over Rs1 billion.....

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Agriculture Sector - Update

What is Being Done with Pakistan’s Surplus Crops? Almost Half of Pakistan Sleeps Hungry by Sumaiya Rizvi Pakistan despite facing the biggest financial crisis resulting from cost-push inflation is doing better in all its business sectors than expected. Pakistan, a net importer of wheat, is now able to export wheat. There is an excess pile of carryforward stocks of sugar, rice, and wheat. This is quite baffling as the country faces may crises such as acute shortages of sugar, wheat, electricity, gas, petroleum, interest rates touching 17 percent, and the reality that the number of people living below the line of poverty has increas ed fro m 25 to 40 perce nt. Zafar Aslam agrees with the government that these factors have resulted from a price increase of essential commodities in the world. Aslam, in his article published in the Tribune, explores how the country aims to manage its surplus crops. Local demand for basic food items has dropped due to inflation and the average individual’s inability to afford these necessities. One wonders why a country with approximately 40% of its population living below the poverty line and unable to afford necessities such as food is exporting its much-needed commodities. The only reason and explanation for this is that our prime consumers, Afghanistan and the Middle East, do not have food. In his discussion concerning the nation’s surplus crops, Aslam in “Pakistan’s exports are putting the nation’s food security at risk” relates that in order to bring food prices down and make it affordable for the average individual an immediate ban should be placed on all exports of food. Furthermore, the ban should remain in place until this goal

has be en acco mplished and until Pakistanis are able to afford feeding a minimum family of five. It is true that this will result in a loss of exports of approximate one billion US dollar a year, it will, however, also benefit 160 million people. The focus away from exporting and incoming revenues should allow the government to concentrate on long-term planning and formulating price control mechanisms so prices do not get so out of control th at d espite being in possession of su rplu s crops, the country’s people are unable to afford food. As a case in point example, Aslam states that although the cost of raw materials and petroleum in Europe is al so dependent on the changing int erna ti ona l m ar ket ra tes, manufacturers are allowed a maximum of three percent price increase per year in order to keep in line with inflation and currency fluctuations. Similar to Europe, there are no such measures in Pakistan. Instead of a much needed price control measure set in place by the government, the exporting companies are able to dictate pries and have gone as far as imposing an increase of up to 300 percent per year. Mr. Aslam appropriately ends his discussion by stating that only sh ar eh old er s and m ult inational companies are at the winning end. While co mpan ie s are obligated to th eir shareholders, governments are obligated to citizens. One wonders what those responsible for the nation half of whom is living below poverty and is unable to feed its children are doing.

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Fauji Fertilizer's 23rd AMC held The 23rd Annual Marketing Conference (AMC) of Fauji Fertilizer Company Ltd (FFCL) was held on April 04-06, 2011 at local hotel, Karachi. Lt. General Malik Arif Hayat, HI(M) (Retd), th e Ch ief Executive and Managing Director of the Company presided over the conference. It was attended by the entire marketing team and senior management of the company. The performance of the year 2010 was reviewed. Discussions on the future fer t ili zer ma r ket, c omp et it ion, opportunities, challenges and strategies to maintain our leadership position were held. The challenge of increasing agriculture production was also discussed. The conference concluded with a training programme for the marketing team.-PR

17pc ST imposed on potassic fertilizers The Federal Board of Revenue (FBR) has imposed 17 percent standard sales tax on the import and local supply of Potassic Fertilizers both Sulphate of Potash (SOP), Muriate of Potash (MOP), nitrogenous fertilizers and calcium ammonium nitrate. The FBR rescinded SRO.103 (I)/2005 and SRO.15 (I)/2006 through a SRO.313 (I)/2011 issued. T hrough SRO.103 (I)/ 2005, the government had fixed the value of Potassi0c Fertilizers both Sulphate of Potash (SOP) and Muriate of Potash (MOP), for the purposes of assessment of sales tax chargeable at import stage as well as against the local supply of these fertilizers at Rs.4610 per metric ton. This fixed value of assessment of sal es tax has been withdrawn by r e sc in d in g S R O.10 3 (I )/ 2 00 5 . The FBR has also imposed 17 percent sal es tax on the locally pro duced nit rogenous fer tiliz er s, ca lciu m ammonium nitrate. Under the SRO.15 (I)/2006, the FBR has fixed the value of taxable supply of locally produced nit rogenous fer tiliz er s, ca lciu m ammonium nitrate (CAN) at Rs 3765 per metric ton irrespective of the value at which supply is made. Now, the FBR has rescinded the SRO.15 (I)/2006 through the SRO.313 (I)/2011 and abolished sales tax on the locally produced nitrogenous fertilizers and c al ci u m am mo niu m ni tr at e.....

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Automotive Sector - Exclusive Article

by Owais Khan

Car makers, vendors pin hopes on new budget, seek long term policy For the first time the car makers and their vendors are making joint proposals for new budget in order to maintain equilibrium in their point of view aimed at protecting the industry as well a s their vendors. But they expect any thing from this government keeping in view its decisions of used car imports. The car makers are now eying the new budget 2011-2012 with a lot of hope to get some relief. The government, instead of giving the industry some breather, has accepted the demand of used car dealers ahead of the budget. A sort of mini-budget for used car importers had been unveiled just few months ahead of new budget 2011-2012 increasing the age limit of used cars to five from three years imported under gift, transfer of residence and baggage followed by increase in depreciation limit up to 60 from 50 per ce nt. However, raising depreciation limit on used cars has yet to provide any benefit to the customers who are still paying high prices for these cars. The used car dealers have eaten up the government’s incentive given to them for providing benefit to the car buyers. Perhaps the main reason for non reduction in used car price after depreciation hike is the jacking up of price of locally assembled cars. Any increase in locally car assembled prices makes an instant impact on used cars. Even many people, who sell their used cars at their residence, also start demanding higher prices in anticipating of huge demand of used cars when locally produced cars become out of reach. Taking cue of losing strength of the rupee against yen and other currencies in the last over one year and rising cost of imported parts, the car makers have been playing havoc with the prices ahead of new budget. The price of cars will further go up in case the new budget comes out with new taxes and duties on

locally produced cars. A leading car assembler, having over 50 per cent market share, says the company has not fully passed on the impact to the consumers relating rupee’s falling value against Yen from January to December 2010 followed by rising imported component prices. He claimed that the company had absorbed the higher impact of Yen-Rupee parity and had been enhancing the price very nominally. As a result the production cost was going up. The leading company has now raised the price by Rs 10,500-20,500 to nullify the impact of losing value of currency in order to improve its profit, he added. The maker of Honda cars had already surged the price by Rs 32,000-40,000. However, he said car sales had been going strong owing to rising demand from buyers in rural areas afte r increasing farm income thanks to good crop of w heat and other crops. But the government is still not serious in strongly asking the car makers the reason of price hike. The government in previous efforts while failing to put

up pressure on the car assemblers for price cut had decided to punish them by liberalizing the import of used cars. Perhaps this is the only instant option available to the government to open up the market for people when the cartel of car makers fails to respond on lowering the prices. Many people think that the Ministry of Industries is actually the main hand in enco uraging the government to take decision of opening used car market which is against the ministry’s mandate. The ministry is bound to promote industries for creating more jobs. The car makers had already rejected the government’s old demand to lower price, the new budget holds a lot of interest for the car assemblers as the government may again give them a jerk by further li ber a liz ing u se d ca r im p or ts. For the first time the car makers and their vendors are making joint proposals for new budget in order to maintain equilibrium in their point of view aimed at protecting the industry as well as their vendors. But they expect any thing from this government keeping in view its deci si ons of u sed car imp ort s.

A leading car maker said that the industry has sought a long term (five to seven years) policy from the government (either favorable or unfavorable) so that the assemblers could seriously make future plans. He said the return on investment usually takes years and any changes in the policy could jeopardize the plan besides ruining the investment. He said the industry has never asked for

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Automotive Sector - Exclusive Article

It is high time that the local assemblers should gear up their efforts for open competition with imported used cars. They should improve their quality and offer new models and designs besides ensuring quick delivery. Pakistani customers really want better quality cars but unfortunately they are bound to purchase locally produced cars any undue favor or any sharp cut in duties on completely knocked down kits. The government should focus in giving incentive aimed at promoting new jobs and vendor development. The assembler said the government is considering providing incentives to the new entrants. The industry has asked the government not to provide any tariff protection to new entrants and instead give them some relief in income tax, land, power and gas. R ep ort s a r e sw ir l ing t h at th e government is al so considering a proposal for bringing the import duty at 25 per cent on various items. The assembler said in case it is implemented in the budget then it will destroy the local industry as the duty on import of completely built up (CBU) units is 50 per cent. The country’s industrial community will start trading of goods rather than setting up new units or make investment in their existing units. A leading car vendor also the vendor i nd ustry also seeks stab ility in gover nment’s economic policies, implementation of Auto Industry Development Plan (AIDP) and focus on localization. Now the government has allowed used tractors, bus and truck import under various schemes which has surprised many industry people. General Manager Sales, Baluchistan Wheels Shaikh Muhammed Iqbal has strongly criticized the ECC decision to allow import of five years old second hand trucks, buses and tractors at lower rate of duties. He said this decision would badly hurt local automobile industry, which has already been severely affected by 60 per cent depreciation limit on the import of used cars. Instead of encouraging the local automobile industry and giving incentives for increasing production and exports, the government is giving jerks and jerks so as to destroy the local industry by allowing used trucks, buses and tractors as well. Shaikh Iqbal said instead of taking such decisions which would damage local automobile industry the government should allow import of those vehicles on concessionary rate of duties which

are not locally produced su ch as luxurious Jeeps 4x4 vehicles and above 1800cc cars. By this way government would earn more revenue. If the government has sympathy with general public than prices of diesel should not be increased because general public uses buses and pays higher fares due to ever increasing prices of fuel. He said cars are not the need of general public for which government shows m o r e s ym p a th y w h ic h is no t understandable. It is necessary to mention that India provides subsidies on diesel so as to given incentive to general public. In India diesel prices are 50 per cent lesser to petrol prices. Many people think that auto makers in Pakistan have been crying for incentives and packages for years as they look for long term policies. Neither the current nor the previous governments had ever initiated an enquiry against the car makers for rolling out decades’ old and outdated models on which they have been pushing up the prices. The governments have also never checked the deletion levels of car makers which they would have to achieve in a given specific time. The assemblers have also been blamed for keeping money in their hand of booking thus giving buyers two to six months delivery period in order to get interest on the deposited money. The government and even the customers have tolerated the local industry for years as both wanted the auto industry to grow. However western countries allow up to 10 years for new sector monopolies. After which the market is open to competition in order to provide customers a wide choice to select their cars on their own besides getting quality cars. Perhaps Pakistan is the only country where 1989 Suzuki Mehran model is still being assembled with old engine but with minor cosmetic changes. Even Cultus, Alto and Daihatsu Cuore are also decades’ old models being sold at very high price. Can Mehran CNG car (VX AND VXR models) with an inferior interior having no watch and illumination in its speedo meter deserve a price of Rs 533,000 to

Automark Magazine | May-2011 16

Rs 584,000 when a person has an advantage to get a used car with new engine and impressive interior even sometimes fully loaded version. While crying for lower volumes to make heavy investment, they did not invest when the industry had enjoyed sale boom few years back. Despite uncertain political and economic conditions their sales are still running on a positive note. One can th ink the richness and prosperity of the vendors of decade old models who are happy in making outdated parts. It is high time that the local assemblers should gear up their efforts for open competition with imported used cars. They should improve their quality and offer new models and designs besides ensuring quick delivery. Pakistani customers really want better quality cars but unfortunately they are bound to purchase locally produced cars due to availability of parts at normal rates and sales/service network of local assemblers as compared to problems in getting used car parts at higher rates. The local manufacturers should focus on these areas rather than seeking ban on used car imports or looking for more incentives. They are enjoying good sales despite high intere st rates an d lesser car financing by banks. To some extent the rising car sales is also due to pathetic transport system as people prefer buying their own car at any cost. Chairman All Pakistan Motor Dealers Association H.M. Shahzad said there is no justification for increasing the vehicle price when Yen has been losing its strength against various currencies for the last few weeks. He urged the government to allow import 10 years old cars and also remove regulatory duty on import of various models so that consumers could get cheaper cars. At one hand the local car assemblers have reduced the production in the aftermath of Tsunami in Japan which has resulted in resurfacing of premium on cars on spot buying due to demand and supply gap. On the other, they are cashing on rising demand especially from th e grow er s’ community….

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Exclusive Article on Agriculture Sector

by Syed Mansoor Ali

Energy Conservation in Agriculture would help Pakistan prosper gricultural tractors and irrigation pumps are large consumers of energy in the agricultural sector. Proper use of these machines could save energy and save millions of dollars. Proper operation, timely repairs and conducting daily routine checkups can enhance the life and performance of these machines. An added bonus of these measures will be a cleaner environment. To bring ab ou t t h e cu l t u re of " ene rg y conservation in agricultur e," an investment in human capital through training and outreach is needed as energy cannot not be saved until it is

Syed Mansoor Ali

known how it is being used and where its efficiency can be improved. This will pre pare farmers to be committed towards the energy rational ization efforts.

In the late eighties, US AID supported National Energy Conservation Centre (ENERCON) through a Washington based company named RCG/Hagler, Bailly, Inc. to

The tractor energy audit and retrofits did not include the full potential of energy savings as engine repair and maintenance was not included in the study. However, it is quite visible that improving the operatorâ&#x20AC;&#x2122;s skills and knowledge on energy conservation could bring about a healthy change in the tractor performance, work rate and energy savings.

The aims and objectives of tube-well energy conservation program (centrifugal pumps are commonly used on tube-wells) were similar to the tractor energy program. The aims were to carry out audits for evaluation of performance and subsequent retrofit to make imp rovemen ts w her e n eeded .

run projects on energy conservation in various sectors such as transport, building, industry, and agriculture. The objective of these projects was to der ive easy energ y conservation solutions and encourage the government of Pakistan to establish a National Energy Conservation Policy for Pakistan. The main purpose of this article is to share the results and findings of the projects with the agriculture sector. Agricultural tractors and tube-wells (Diesel 62%, Electric 38%) are large co nsumers of energy (d ie sel an d electricity) in the agricultural sector. Two separate programs for tractors and tube-wells were initiated to identify and ev a lu a te e ne r g y c o ns er va t i on opportunities. Their major findings to save energy are described with a purpose to provide awareness to the field officers belonging to different departments of agriculture whether in government or private sector to disseminate this information to the end-user.

Tractor Energy Conservation Tractors were selected randomly to cond uct field ener gy audi ts for documenting tractor performance as farmers operated it. Prio r to this dynamometer testing was carried on the same tractor to determine their on-farm status in terms of maximum PTO power and fuel efficiency. It was done through

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Exclusive Article on Agriculture Sector

The results concluded that an average 21% in diesel fuel and 19% saving in time is possible by adopting the mentioned energy conservation tips. The objective of this paper is not to focus on mathematical models to prove savings in terms of dollars but just for an idea to be implanted within the minds of end-users. applying variable load on the prime mover to measure the prime movers ability to move or hold the RPM as related to the "breaking force" applied. The data obtained were power (KW) produced at different engine RPM and its corresponding values of fu el consumption (l/h) and specific fuel consumption (l/kw-hr). Once the dynamometer testing and field energy audit wherein farmer/operator was asked to operate his tractor in the way he usually did was completed, necessary field data was collected. An assessm ent o f th e ca pa bi li ties (deterioration in engine power and fuel efficiency) of his existing machines was made by comparing these results with those corresponding OECD/Nebraska tractors tests. Results of field audits were critically examined to determine whether the subject tractor has been operated to optimum level or not. Tractor operators, following these tests, were asked to operate tractors on the recommendations made by the field engin eer to demonstrate retrofit mea su re s in o rd er to obser ve improvement in performance (specific fuel consumption and work rate) and the corresponding energy savings .

The findings and resulting energy saving tips that should be passed on to tractor operators are enumerated below: 1. Tire Inflation pressure: tractor’s rear tires play an important role in the performance of the tractor. The power

produced in the engine is transmitted into the soil through rear tires. If the tire pressure is not in the recommended range, it will cause excessive slippage. This will reduce the performance and become the cause of untimely soil compaction resulting in the loss of fertility at a later stag e. It is recommended that the tractors rear tire pressure wh ilst eng aged in the agricultural job should be between 12 to 14 psi. Generally, rear tire pressures were found to be over inflated by 2022psi. The tractor slip should be in the range of 7 to 11% in unplowed field and 10-15% in plowed fields. Energy saving through this measure is between 1020%.

2. There is a common tendency among farmers to run their engine cold: The recommended engine temperature should be between 70 to 80 degrees. A thermostat vale and radiator cap makes sure the temperature inside radiator should remain in the permissible limits. When the engine runs between 30 - 40 degrees, it causes piston rings and liners to wear. This does not only force early engine overhaul but increases the fuel consumption by 5%.

3. Gear up/throttle down technique: farmers usually operate their tractors in maximum engine RPM and use low gears. For better tractor performance it should be reversed. The engine RPM should be kept 80% (17001900) of the rated engine RPM (2400) during plowing while the selection of the gear, high-1, or 2, should be used

Automark Magazine | May-2011 18

to increase the travel speed of tractor not the engine revolutions. The tractor speed should be 7-9 km/hr instead 5-6 km/hr which is a common practice.

4. Oil bath Air Cleaner: regular inspection and its cleaning is mandatory otherwise dust will start entering in the engine and after getting mixed with the oil it will start acting like sand paper. This increases diesel consumption by 10%. The tractor energy audit and retrofits did not include the full potential of energy savings as engine repair and maintenance was not included in the study. However, it is quite visible that improving the operator’s skills and knowledge on energy conservation could bring about a healthy change in the tractor performance, work rate and energy savings. The results concluded that an average 21% in diesel fuel and 19% saving in time is possible by adopting the above mentioned energy conservation tips. The objective of this paper is not to focus on mathematical models to prove savings in terms of dollars but just for an idea to be implanted within the minds of endusers. Proper use of farm machinery and practices can have such a large beneficial impact on the environment. We h av e approximately 500,000 tractors plying in the country and the diesel rate per liter is 100Rs. Good ‘green’ practices will not only safeguard the rapidly deteriorating environment but al so beco me the cause for a monetary gain for farmers, industry stakeholders, and the country at large.

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Automotive Sector - Update

4. Impellors: the main component

Tube well Energy Conservation The aims and objectives of tube-well e ne r g y c on se r va t i on p r o g r a m (centrifugal pumps are commonly used on tube-wells) were similar to the tractor energy program. The aims were to carry out audits for evaluation of performance and subsequent retrofit to make improvements where needed. The only difference was that in this program pump overhaul and repair was included in the retrofit. The first step was the selection of the centrifugal pump that was situated in the pre-defined clusters. The audit was c on d u c t e d w i t h t h e h el p of instrumentation and equipment to d etermine the amount of energy consumed to raise/pull certain volume of water (discharge). After completing the audit, the subject pump w as dismantled and brought to the approved workshops that were selected for this job. The repair of these pumps and its post audit tests (retrofits) indicated that excessive amount of energy is wasted due to the poor maintenance and upkeep of these pumps, prime movers and transmission losses. The efficiency of direct coupling is nearly 100% but energy is lost in belt drives (continuous deformation and flapping) mainly due to slip. The major findings contributing ener gy losses wer e as follow s:

1. Proper selection of the piping: out of the total energy supplied by the pump to water the fields, only part is used to perform useful work . The remainder is dissipated in friction as water flows through the piping system. Therefore, pipes of small diameter, unnecessary height and length of discharge pipe, bends, restrictions etc. causes a loss of energy. The diameter of the suction and discharge pipe should be selected carefully. The general criteria to be used are as such: (see the chart at previous page below) Another very important point to be remembered is that centrifugal pumps

should be installed close to the water surface (maximum 5ft) for better water lifting in a more efficient manner. The w r ong select ion a nd i mp r op er installation of piping and flanges cause 30 to 40% decline in energy savings.

2. Misaligned coupling and belt drives slippage: the connection between the prime mover and pump should be properly aligned otherwise due to slippage, un-balanced rotation or bent coupling could cause damage to pump bearings.

3. Stuffing Box: it was found out that stuffing box area, which plays an important role in the performance of the pump, is neglected largely. It is comprised of a gland that has two bolts on it that need to be tightened on the stuffing box to keep the re quire d pressure on the packing (rope) inside the stuffing box. If the stuffing box is packed too tightly, it can consume as much as 1/2 hp, and if the unit is only 10 hp to start with, this is quite a large percentage. It could also erode the shaft and burn the packing (rope) that could become a cause of air intake, which could immediately reduce the discharge. Another important component in the stuffing box is a water seal that has a groove with holes to supply water to the shaft. It covers the annular spaces of the shaft and not only keeps the packing cool but also stops the air intake. The cottage industry pumps that are sold in Pakistan, 80 percent of the time do not have a water seal. The test reveals that the malfunctioning in this area could not reduce discharge but a 20% loss of energy also occurs.

brings the water up from the ground and pushes it up on the discharge side. The cottage industry pumps install low quality poorly designed impellors to keep the cost low. The design and proper selection of the impeller is very important as its diamete r, width, uniformity of the vanes, uniform weight and smooth casting plays an important part in the pumping efficiency. The tests results revealed that the impact on efficiency of a bad impellor is 35% less c omp a red to a good imp ell or.

5. Spurious bearings and grease: this is another major cause of low efficiency as all the major components of centrifugal pumps rests on a single shaft. Once the shaft is crooked or bends, the friction losses due to misalignment of these components and the air intake fr om th e g land w il l br ing th e performance of the pump to bare minimum. In general readers and in particular professional s, who are engaged in agriculture, would hav e developed substantial understanding after reading this article that by imparting little education to the end users not only is energy conservation achieved but longer machine life and better performance could help the nation grow stronger. The field staff of tractor companies could provide a meaningful support in the dissemination of this information to their customers.

Once the dynamometer testing and field energy audit wherein farmer/operator was asked to operate his tractor in the way he usually did was completed, necessary field data was collected. Automark Magazine | May-2011 19

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Used Imported Vehicle data

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Shell Eco Marathon Asia 2011

By Majid Mahmood from GIKI

Team Infinity The Power of Green Gh ulam Ishaq Kh an Institute of Engineering Sciences and Technology (GIKI) is one of the most prestigious engineering institutes of Pakistan. GIKI is known the world over for setting a standard of excellence in the field of engineering. This year a group of enthusias tic in div idual s from the institute are attempting to create new strides by building a fuel efficient car that can travel the longest distance using the least amount of fuel. S hell Eco-Mar athon is a global competition, being held in Europe for the last 25 years, encouraging young engineers of tomorrow to come up with ingenious ideas to the energy crisis we are facing. The Shell Eco-Marathon challenges students around the world to design, build, and test vehicles that travel further using less energy in least amount of fuel consumption. GIKI’s Team Infinity is one of the select 20 teams from Pakistan selected by Shell based on the technical submissions. T eam Infinity is a group of 11 undergraduate students from the Faculty of Engineering Sciences at GIKI and will be representing Pakistan at Shell Eco-Marathon Asia 2011 which is to be held at the Sepang International Circuit in Kuala Lumpur, Malaysia. This is the third successful year that teams from GIKI are participating in the Shell Eco Marathon and this year attempt to improve on the performance of the earlier teams and bring the award for the most fuel efficient car back home. Team Infinity is a group of 11 young

undergraduate engineering students and an experienced advisor from the Faculty of Engineering sciences. Team Infinity will be building a fuel efficient car based on the ‘dolphin’ shape which has been proven to be the most aerodynamically feasible design known to man. The car is expected to run more than 150 km on a single liter of fuel due to the weight reduction measures, conversion of a standard carbureted engine to Electronic Fuel Injection engine for an increased control over fuel metering, this allows the car to travel the furthest. The team has to make sure about things like safety, emissions (to protect the environment and go green). These two objectives are in top of the list with maximum mileage. A “Fire Retardant” material is placed in between the engine and the driver, to prevent any possible injury in case of a fire, integration of an Emergency STOP Button to isolate the battery and stop the case of a fire, a 5-point safety harness for the sa fety of th e driver, and a first aid kit and fire extinguishe r placed in the car

too. Some of the objectives of building a fuel efficient car apart from participating in Shell Eco Marathon Asia 2011 are also to build relations between GIKI, industry, and the community, to build effective management, communication, and teamwork skil ls amongst the student team, mentors, supervisors, sponsors, and the community, to further public interest and support for energy efficient vehicles as our country is facing an energy crisis and with the increasing prices of fuel we need to establish Pakistan as a hub for fuel efficient vehicles. The objective of Shell Ecomarathon is to encourage students to think about and develop practical solutions that can help answer mobility and energy challenges of today and tomorrow. For more details log on to the website www.giki.edu.pk/infinity or t h e Fa ce b ook f a n pa g e a t www.facebook.com/infinitygiki Pakistan Zindabad....

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Energy Crisis - Exclusive Article

Cover Story by M. Owais Khan

Challenges of the oil refining sector Where the circular debt issue will take the stakeholders, consumers

The lingering circular debt issue among the power sector, refineries and Pakistan State Oil (PSO) has al ready hit the consumers very badly in shape of massive load shedding besides making reluctant these sectors to make future investments. All the stakeholders have been involved in the blame game but the government is not serious to look into the problems of the oil industry and consumers’ suffering for persistently facing load shedding and some times petroleum products’ shortage. The current month and June will prove more testing for the consumers in case circular debt issue again crops up and power companies and PSO again hold each other payments leaving the consumers to suffer worst power failures. The government in the last three years of its tenure had proved to be highly

painful for the consumers and industries by indulging them in various issues of high food prices, rising cost of living, rising oil and gas prices, power and gas load shedding, oil and gas shortage, poor law and order situation. While there is no push button solution to resolve this crisis immediately the country is set to face crisis on the energy front unless there is a political will and resolve to implement an integrated energy plan. Nuaman Khan at Top Line Securities said last time after turnover tax reversal, he highlighted that the circular debt as a major risk to th e PSO and its s h a r e h o l d e r s. T h e s t oc k h a d underperformed by eight per cent since then by posting negative return of two per cent against market return of six per cent. Finally, last week, the government disbursed Rs 90 billion to cash starved PSO for meeting its fuel supplies which has now reduced its overall receivables to approximately Rs 90 billion. This will eventually reduces its reliance on bank borrowings and hence financial charges. Though gross margins are attractive on deregulated furnace oil business on which the company enjoys more than 89 per cent market share, the circular debt has eroded its profitability during last couple of years. As per our estimates, had PSO not been affected by the circular debt, the earnings of the company would have been higher by Rs 25-30 per share in last two years. Due to the circular issue in power sector, the company liquidity has ero ded resulting into average financial charges of Rs eight billion during FY09-10 compared to an average Rs one billion during FY06-08. Thus

any improvement in circular debt will eventually ease of its borrowings and financial charges. He said most of the investors are also interested in the worst case scenario. For PSO, the worst case would be that the government not only withhold remaining circular debt payment but also keep power tariff rates steady. In that case there are chances that the circular debt could grow up to Rs200bn by the end of FY12 leaving PSO to rely heavil y on short-term borrowings. However, this case is highly unlikely given IMF strict condition on power tariff rates. In this scenario, PSO’s FY12 EPS would be Rs 30 and target price is Rs 245.

Spokesperson of the PSO Marium Shah said that as on May 9, 2011 receivables from WAPDA, HUBCO, KAPCO, PIA, OGDC, KESC and Pakistan Railway still stand at Rs 30.5 billion, Rs 29.6 billion, Rs 13.6 billion, Rs two billion, Rs 338 million Rs 6.3 billion and Rs 850 million. PSO had to pay Rs 12.7 billion to PARCO, Rs 5.2 billion to PRL, Rs 9.2 billion to PRL, Rs 13 billion to ARL and Rs 4.6 billion to Byco. LC payments to Kuwait Petroleum Company and fuel oil suppliers are Rs 54 billion. “PSO management is working closely with the Petroleum Ministry, Power and Railway Ministries to solve the issue,” she said adding that the government injected Rs 120 billion in PEPCO but Rs 29 billion was given. After receiving Rs 90 billio, she said the PSO had paid the refineries, retired some letters of credits and paid government taxes. Another oil industry person believes that the circular debt issue can only be solved

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Energy Crisis - Exclusive Article

“The total energy import bill keeping in view of $100 a barrel will reach $62 billion by 2025,” Deputy Managing Director Pakistan Refinery Limited (PRL) Aftab Husain says by the government. The government can arrange funds by making refineries settle their dues. Unlike other firms refineries are sitting on cash as they have to pay over Rs 40 billion in taxes, petroleum development levy an d to OGDCL. A report appeared in the press the government has decided to clear chronic circular debt in the next two months through Rs 130 billion borrowing from banks. The finance ministry is working on raising Rs 130 billion from the banking sector through term finance certificates while about $500 million to one billion dollars would be raised thr ough th e lau nch of OGDCL’s exchangeable bonds to clear circular debt issue from the balance sheets of power companies. Will this become a practical reality is the million dollar question which will also show the seriousness of th e government.

Deputy Managing Director Pakistan Refinery Limited (PRL) Aftab Husain says that with nominal GDP growth projections of 2.5 to four per cent the energy consumption by the year 2025 would be 138 MMTOE which translates into a power requirement of 39,000 mega watt and oil require ment will be 34.5 MMTOE followed by gas requirement of 69 MMTOE. “The total energy import bill keeping in view of $100 a barrel will reach $62 billion by 2025,” he said. Pakistan energy mix comprises of 48 per cent share of gas, 32 per cent oil, 10.3 per cent hydel, eight per cent coal, one per cent liquefied petroleum gas and 0.7 per cent nuclear. Pakistan’s population is 187 million with growth rate of 1.6 per cent per annum while per capita energy is 0.29 MTOE. Pakistan’s GDP is $170 billion, while per capita GDP is $1,044 and growth rate is 2.7 per cent. Pakistan’s current oil import bill is $10.2 billion. Pakistan’s strategic location is very ideal and it can become Asia’s trade, energy and transport corridor as on its right there is booming China, India and East Asia, while three is land locked and energy rich central Asia and on the left there energy surplus Middle East exists. Global crude oil consumption is 87.9 million bpd while the refining capacity

is 90.6 million bpd. China leads in the regional crude refining capacity followed by India, Pakistan, Thailand, Middle East and Singapore. Out of 90.6 million bpd global refining capacity, Asia pacific leads with 26.80 million bpd followed by 24.92 million bpd by Europe and Eurasia,21.12 million bpd by North America, 6.68 million bpd by South and Central America, 7.85 million bpd by the Middle East and 3.26 million bpd by Africa. Major additions in the global refining capacity are the Middle East, China and India. In Pakistan, furnace oil leads in product consu mp tion w ith 4 6 p er c ent comprising nine million tons per annum followed by 37 per cent share of high speed diesel with 7.2 million tons, 10 per cent share by petrol with two million tons and seven per cent by other pr od ucts w ith 1.3 million tons. The reason for increased furnace oil consumption in the country is electricity crisis as furnace oil is highly required for additional thermal power generation. Natural gas shortfall is another big reason for high furnace oil consumption in the power sector while its demand will further boost as more furnace oil based power plants are coming up. Another reason is circular debt and negative refining margins. The local crude oil productio n in Pakistan stands at 65,000 barrel per day while country’s refining capacity is 285,000 barrel per day and crude oil deficit comes to 220,000 barrel per day. Pak Arab Refinery Limited refines 100,000 barrel per day followed by 65,000 bpd by National Refin ery Limited (NRL), 50,000 bpd by Pakistan Refinery Limited (PRL), 40,000 bpd by Attock Refinery Limited (ARL) and 30,000 bpd by Byco. On fa c tor s i nfl uenc ing oi l prices/margins, Aftab Husain said supply and demand and product and

Automark Magazine | May-2011 25

crude inventories are the factors followed by geo political situation, economy of major consuming countries, currency (impact of dollar on price), commercial and non-commercial actors and speculators for short term gains. On challenges and opportunities, he said refineries are operating at 71 per cent of designed capacity which leads to heavy dependence on petroleum products’ imports. Among the challenges are circular debt issue, hydroskimming configuration, limitation to meet Euro II product specifications and inability to raise finances with low profitability. On policy framework and decision making, he said a political will is required for taking hard decisions besides pricing mechanism and refining policy. Regarding challenges on pricing development, he said jet fuel import price is higher than local, incidentals from the product price build up removed whereas refineries pay on crude import and a premium on freight, kerosene and light diesel oil formula are tempered (no PDC), distorted motor gasoline pricing mechanism ver sus import pr ice, additional FE expenditure -- $32 million and refineries sustained revenue loss of about Rs 2.8 billion on petrol production in 2009-2010. He said high oil prices will continue while tariff on HSD is under threat. There will be no refineries in case of no tariff protection. On refinery vision, he said refineries having the technology and capacity to pr odu ce envir onm ental fr iend ly products, meet domestic demand and enable exports. He said there is need for government support and incentive in refining pricing formula under a defined timeline. There is a need for environmental projects such as hydro-desulfurization projects must be supported besides level playing field and deregulation of petroleum product pricing regime. Investors be encouraged to set up deep conversion grassroots refineries and integration with petrochemical complex. In future, only refineries having secondary conversion facilities to be allowed and there is a need for setting up plants for export of naphtha conversion into petrol and chemicals.

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Automotive Sector - Update

Auto makers fail to provide information required by EDB The auto assemblers are not providing relevant information to the Engineering Development Board (EDB) including the price of their vehicles, it was learnt. Sources in the EDB said that the issue was taken up in the last Auto Industry Development Committee (AIDC) and the former protested "that companies either do not respond or respond very slowly if any information such as prices is required by the EDB." The EDB h as reported ly sou ght interventio n of the Pakistan Auto Manufacturers Association (PAMA) to ensure provision/availability of relevant data from the Original Equipment Manufacturers as and when requested. The AIDC meeting was held in the EDB with its Chief Executive Officer Aitzaz Niazi in the chair and was attended by the representativ es of PAMA and Pakistan Association of Automotive Parts and Associates Manufacturers (PAPAAM) to discuss the industry

related issues and propose measures in the budget for their solution. The officials of the EDB said that they would keep PAMA informed about all such requests and would seek its help for getting required information from the local auto manufacturers. The meeting held discussion on future of Tariff Based System (TBS) which was i nt r o d u c e d i n A u t o I nd u st r y Development Pl an (AIDP) for the development of local industry and to ensure localization of hi-tech parts. The five year period of TBS is nearing expiration and may be replaced with some other system. Previously, deletion

programme was replaced with the TBS. Sources said that a detailed presentation about the alternative system to replace TBS was given by the PAMA and PAPAAM but it was decided that the discussion on presentation would be held in the next meeting of the AIDC, probably prior to the budget. Some proposals in this regard were presented by the industry as well as duty structure for various items which are not being manufactured locally. An official told media that the EDB was not ready to commit anything at this stage and wanted to have a detailed deliberation on the alternative plan and requested the industry to provide a ju s tif i cat io n wh y th e pa rts re co mmende d by them sh ould be included in the generic list. The industry reportedly has recommended inclusion of some parts in the generic list for import at zero percent rate of duty.

EDB urges industry to conserve energy Engineering Development Board (EDB) has appealed to the industry to conserve energy, says a press release. It said that industrial sector should focus on conservation, as "energy saved is energy produced" and its cost is much lower than the generation. Referring to three major energy consuming sectors-industry, transport and domestic, it added that the share of industrial sector during fiscal years (2007-2009) declined from 44 percent to 40, though still being the largest energy consumer. It described the steel sector as the main ind ust ria l sub -sector , wh ic h is consumi ng th e m ajor chu nk of electricity/gas. According to estimates based on a recent random survey by

EDB and a Dutch expert around 40% of energy is wasted in steel sector, which is highly fragmented consist of about more than 1800 foundries and 400 plus re-rolling mills. The EDB observed that the foundries are of small size and are using obsolete an d energy inefficient technology. Currently, the melting capacity available in the country is 4 million tons. The meltin g industry claims that they actually consume 800 units of electricity in melting one tone of scrap, against world 350 to 400 units. This translates into wastage of about 400 units per ton. Multiplied by 4 million tons capacity, the w astage comes to 1600MW, equivalent to generation of one large hydroelectric power plant, it added. The

Automark Magazine | May-2011 26

statement said that the re-rolling sector consumes 130 units of electricity per ton against global benchmark of 70 to 75 per ton. To produce about 4 million tons of MS products, the wastage comes to about 240 MW. The EDB has suggested to th e government to intr odu ce mandator y energy aud its of th e industrial sector particularly the steel sector to restrain it from using energy inefficient technology and small scale obsolete melting fu rnaces. -P R

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Press Release

Automotive Sector - Update

J. Pereira appointed Vice Chairman of FPCCI’s Standing Committee on Science, Technology and Technical Education

Sena tor Haji Gh u la m A l i, President of the Federatio n of Pa k is t an Cham ber s of Commerce and Industry in an official notification has appointed J. Pereira, General Manager of the Product Support Division of Al-Haj FAW Motors (Pvt) Ltd. as the Vice Chairman of the FPCCI’s Standing Committe e on Science, Technology and Technical Education. Earlier, Pereira was the Membe r of the same committee. During his current tenure Pereira was instru mental in establishing the Technical Wing of the SI TE Model School, a project of the City District Government of Karachi where he set up t h e Dep ar tm ent of Au tom otive Technology and got the two years Technical School Certificate (TSC) programme registered with the Sindh B oar d of T ech nica l E du ca tion. Later, he took on the task of getting the two years Motorcycle Technology course i n d u c t ed a t t h e G o ve r n m en t Compre hensive Higher Se co ndary School in Korangi through the Sindh B oar d of T ech nica l E du ca tion. He also facilitated the SOS Technical Training Institute in inducting the six

months Motorcycle Technology course at their institute located near the Ebrahim Hyderi Fish Harbour at the Korangi Creek in Karachi. Pereira conducted a number of Career Counseling programmes for the youth at various government schools including the missionary schools run by the Rom an Ca tholi c Chu rch of t he Archdiocese of Karachi where he was t h e M e m b er of t h e C at h ol i c B usinessmen and Professionals Association (CBPA) and Head of the Technical Education Committee of the CBPA. From 2002 to 2010 he served as the Principal of the Training Centre of Hinopak Motors Limited where he established the qualification of Heavy Duty – Moto r Vehicle Technician (MVT). Over 500 students passed out and are doing well in the Automotive Industry of Pak is tan an d abroad. In May 2010 Pereira was electe d unopposed Member of the Council Executive Committee of the Chartered Institute of Logistics and Transport (CILT), Pakistan. Then again in June 2010 he was once again elected Member of the Education and Training Sub Committee of the CILT. Pereira is an active member of the faculty of the Chartered Institute of Logistics and Transport where he

delivers lectures at the Diploma Course in Logistics and Transport and the Diploma Course in Supply Chain Management (SCM). His field of specialization is Transportation Management. He has recently developed his own courses in Fleet Management for the Logistics and Transport Companies and another course in Automotive Sales, Service and Spares Management for the A u tomoti ve Indu str y and th ei r dealerships which he plans to launch in the near future. He is also a Member of the Governing Body of the House of Hope, Drug Rehabilitation Centre (formerly Marie A deliade Reh abilitation Centr e) operating in Karachi and at Sinjhoro in Sanghar (Interior Sindh). Here, at Sanghar he will be setting up a Technical Training Centre as a part of the rehabilitatio n programme for the recovering drug addicts. The technical trades being considered here are: Automotive Technology (Motor Mechanic, Diesel Mechanic, Motorcycle Mechanic, Auto Electrician), General Electrician, Domestic App lia nce Technician, Carpentry / Wood Working, Tailoring, Poultry Farming and Cattle Breading etc. Pereira is also a Certified Master Practitioner of Feng Shui. He qualified for the practice in Feng Shui from the world’s master (Guru) of Feng Shui, Ms. Lillian Too at her own institute i.e. Lillian Too’s Institute of Feng Shui in Malaysia. Feng Shui is the art and science of bringing about harmony in the environment with the intention of creating health, wealth and prosperity. He will be commencing short courses in Feng Shui in the near future.

Automark Magazine | May-2011 27

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Automotive Sector - Update

July-March import of generators falls by 34.4pc

Import of power generators has been falling despite continuous power crisis and reports of increase in the duration of load-shedding in the coming months. Total import of generators during JulyMarch 2010-2011 plunged by 34.4 per cent to $750 million from $1.14 billion in the same period of last fiscal year. Trade and industry people remained cautious in importing power generating machines. They only made higher imports of $86 million in January 2011 as compared to $70 million in February 2011 and $57.5 million in March 2011. In January 2010, February 2010 and March 2010, imports were recorded at $74 million, $141 million and $134 million, respectively. Import of power generating machines plunged by 17 per cent to $1.435 billion in JulyJune 2009-2010 from $1.748 b illion in July-June 20082009. Reports about rental power projects and other measures to overcome power crisis had forced market people to make slow imports.Chairman, Karachi Machinery Merchants Group, Sikandar Shahzada, said diesel generators sales are going d own af te r in cre as e in its prices following imposition of 17 per cent sales tax from March 15. He said the season of generator buying in the Punjab is yet to pick pace where

weather is still considered pleasant followed by rains, but sales will depend much on intensity of weather and loadshedding. A few years back, the buying season used to pick up from February/March. Sikandar said one of the main reasons of falling sales in Karachi is the uncertain business environment caused by poor law and order situation and rise in reports of extortion from shops due to which traders are taking less interest in making further investment. He said after increase in income tax to around six per cent from one per cent, followed by hike in the Federal Excise Duty to 2.5 from one per cent, prices of generators have risen by nine to 10 per cent after March 15. He said there was some buyers’ in the generators market in the last two days but high food inflation, coupled with rising utility bills, restricted many buyers t o g o for only requ ir ed items. He said diesel is costlier than petrol which is also making a negative impact on diesel generators sales. P r esid ent, P aki sta n Ma ch iner y Merchants Group, Khurram Saigol, said imports may remain slow by the end of current fiscal year as compared to last fiscal year due to buyers’ lack of interest, coupled with high prices of generators. Khurram said that imposition of various taxes and duties in March raised the price of residential generators from two KVA to six KVA by Rs2,000 to Rs5,000. He urged the government to remove duties and taxes on generators till the power crisis is not resolved in the country. He said Chinese-made generators have captured the market mainly while import is also going on from the UK, US, Japan, England, etc.

Industrial inputs import Manufacturers may get WHT exemption certificate The Federal Board of Revenue is seriously reviewing a budget proposal to introduce a new provision in the Income Tax Ordinance 2001 to allow withholding tax exemption certificate on the import of industrial raw materials consumed by the local manufacturers. Sources told media that the FBR should empower the Chief Commissioners of Inland Revenue to allow exemption certificate on the import of raw materials an d in puts used by the dome stic manufacturers. This exemption should be conditional and only be issued taking into account different factors with the surety that the raw materials would not be sold in the open market and 100 percent would be consumed by the manufacturers. Pr ese ntl y, th e im p or ter s- cu m manufacturers have to pay 3 percent withholding tax on the import of raw materials and no facility of exemption ce rtificate is av ailable to the said category of manufacturers. The facility of withholding tax exemption certificate on the import of industrial raw materials at lower rate of withholding tax should be granted in the coming budget. The FBR is examining the proposal in view of current trend of imports and deduction of withholding tax on the imports of raw materials by the local manufactures. This would not have revenue implications and it would fa c i l it a t e t h e i m p or t e r s- c u m manufacturers. The FBR can place some conditions for the manufacturers for having exemption cer ti fica tes from th e Ch i ef Com missioners, if necessa ry.....

Motor oil: US producer enters Pakistan One of the largest producers of motor oil in the United States, Valvoline, is bringin g its products to Pakistan. Speaking at the launching ceremony, Director Petrozol, the distributors of Valvoline’s automotive lubricants, Riaz Asghar Chaudhary explained that his

company would expand Valvoline’s presence in Pakistan and would be bringing its entire range of products such as coolants and motor oil s. Petrozol General Manager Ali Malik said that 240,000 tons of lubricants were sold in Pakistan in 2009-10 and most

Automark Magazine | May-2011 35

of the market share was held by traditional companies such as PSO. However, he said that this share had declined over the last three to five years as a lot of new brands were being introduced w hich were gradually grabbing market share....

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Automotive Sector - Report

by Sumaiya Rizvi

The Uncertain Future of the Auto Industry In a press conference on Thursday, April 21, 2011, the Indus Motor Company (IMC) stated that production is being cut because of the challenges faced by Toyota On Friday March 11, 2011, a magnitude 9.0 earthquake hit Japan; the most powerful earthquake to have hit Japan trigge red a giant an d immensely destructive tsunami. This Japanese crisis has caused many industries to face a variety of challenges. This includes Toyota, the world’s largest automaker, whose manufacturing plants are situated in the region impacted by the earthquake and tsunami. There has been a worldwide decrease in production of cars as production has been influenced not only in Japan but also in the United States, European Union, China and Australia. In some cases, plants have been shut down completely on a temporary basis and some are running at half-capacity or less (Ito 2011). It is expected that output in Thailand may also be cut. This crisis is also having a huge impact on the auto industry in Pakistan. It is feared that economic activ ities overal l will be influence d because of th is crisis. In a press conference on Thursday, April 21, 2011, the Indus Motor Company (IMC) stated that production is being cut because of the challenges faced by Toyota. IMC notified the stock exchange that production will be cut short and that it will be operating at approximately 60% of its production capacity for the months of May and June. Reservations of new vehicles have been suspended in an effort to curtail delivery problems as the company aims to maintain prompt delivery of previously booked orders. Consequently, the vendor industry is also facing trouble and premiums on vehicles for all those who cannot wait for the delivery of their vehicles has risen significantly. IMC Director of Marketing, Mr. Raza Ansari told Mr. Memon of Automark magazine that employees would not be laid off be cause of production cuts. The fear of a rise in unemployment and the impact that this crisis will have on economic activities is rooted in the uncertainty that the auto industry currently faces. IMC intends

to engage its employees in plan t improvement activities and training courses until things return to normal (Khan 2011). According the All Motors Association’s chair, Mr. H. M. Shahzad the possibility of price increase is tempting automakers in Pakistan to use the Japan crisis as an excuse for production cuts whereas the reality is that complete knocked-down kits (CKD) and semi knocked-down kits (SKD) can be acquired from countries such as China, Indonesia, Malaysia, Philippines, Singapore, and Thailand. Mr. Shahzad further relayed that in only one day, since IMC has stopped taking new vehicle orders, the price of 1300 cc cars has jumped from 30 thousand to 1.5 lakh rupees and for 950 cc cars from 25 thousand to 1 lakh rupees. Mr. Shahzad’s claim is further supported by a report by the Federal Bureau of Statistics according to which the import of CKD/SKD kits for local assembly of motor cars from various countries has not witnessed decline. The report also shows that in March and February the import remained at $41 million each. The July March 2010-2011 import went up by 16.2 percent to $359 million from $309 million in the same period of last fiscal year (Khan 2011). Pak-Suzuki Motor Company (PSMCL) rejected a vendor’s claim that production may drop by 1,500 – 2,000 units for the months of May and June from 6,000 – 7,000 units. Mr. Shafiz Ahmed Shaikh, head of Public Relations for PSMCL, confirmed that the company has no plans to reduce production or suspend booking (Khan 2011).

Automark Magazine | May-2011 36

Toyota expects recovery of production levels to initiate as early as July in Japan and a complete return to normal levels by the end of this year. Outside Japan, however, this process may start as late as August. Toyota’s employees are focused on lending a helping hand to their plants, dealers and suppliers as they aim to speed up recovery. Toyota plants are working at 50 percent capacity and in North America at 30. As far as future goals of the company are concerned, executive vice president, Shinichi Sasaki stated that the company aims to minimize risk of similar holdups in the future. Mr. Sasaki related that if something happens in one place all production lines could stop, which is precisely what the company aims to avoid in the future. The automaker, therefore, is aiming to standardize parts so that they can have replacements availabl e, if necessary (Ito 2011). Refer enc es & Related Read ings Ansari, R. (2011, april 21). IMC Press Conference. (H. Memon, Interviewer) Aslam, Z. (2011, April 18). Pakistan’s exports are putting the nation’s food security at rist. The Express Tribune. Retrieved from http://tribune.com.pk Ito, S. (2011, April 21). Toyota says production back to normal by year-end. Aggense France-Presse. Retrieved from http://news.google.ca Khan, A. S. (2011, April 20). Car makers likely to curtail production. Dawn. Retrieved from http://www.dawn.com Khan, R. (2011, May 07). Pakistan’s LNG future and misconceptions. Pakistan O bs e rve r. Ret rie ve d fr o m http://pakobserver.net OnePakistanNews. (2011, April 22). OnePakistanNews. Retrieved fro m ht tp :/ / www.o nep aki st an .co m Daily Express. (2011). Japan se purzoon ki farahmi mutasir: Gariyon ki paidawar mai kami, premium dadh lakh tak pohanch gaya. Daily Express. Retrieved from h ttp ://w ww.express.com.pk

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Automotive Sector - Update

Awaiting a new industrial policy The automobile industry considers the decision to import 5-10 year old / used cars as a big blow to it. Manufacturers and traders of imported automobile parts do not see eye to eye. Obviously, there are conflicts of interest. THE announcement of new industrial policy has been delayed. Perhaps, this may be the right approach because there is a severe energy shortage and the existing industries are confronted with heavy loadshedding of electricity and gas. The policy planners have an impossible task on their hands as an industrial policy for accelerating the economic d evelopment is urgently need ed. Numerous obs tacl es to industrial development need to be removed. Import trade and local manufacturing are closely linked. The automobile industry considers the decision to import 5-10 year old / used cars as a big blow to it. Manufacturers and traders of imported automobile parts do not see eye to eye. Obviously, there are conflicts of interest. Imposition of export duty on cotton yarn to help the value-added sector had an adverse impact on a number of spinners in the textile sector. Provision of conducive environment for p rom ot ion of ind ustr ies is th e governmentâ&#x20AC;&#x2122; job and there should be a mechanism in place to sort out problems arising directly from the government policies. Certain important industries like power generation and fertiliser manufacturing compete for the bulk use of natural gas. In case of impending shortage of gas, concerned ministries need to take remedial measures well in time so that c u stom er s/u ser s ar e di stu r bed minimally by way of loadshedding or increase in fertilisers prices coupled with shortages. In the creation of new capacity for power generation, fertiliser or other in dustries, formation of monopolies is also to be av oided. There are no signs of cl earing the housing backlog. Measures are needed for strengthening the construction

industry. Industries producing material, like steel, cement, paints, concrete blocks, wooden or steel doors and windows, etc should be promoted so that construction material is available at cheaper rates. . The private sector has only a few options for long-term credit. Commercial banks being riskav ers e, like to lend to government instead of private sector which feels crowded out. Private sector is facing difficulties in mobilising funds for establishing new capacity or for balancing or modernisation of existing units. Industries are also required to comply w it h all th e envir onmenta l requirements. Some industries do have plants for part or full treatment of industrial effluents but many ignored these requirements and now consider them as a problem. Meeting the full environment requirements involves initial capital cost for building the plants and the recurring cost for operating and maintaining these plants. Industrial policy may take cognisance of the prevailing situation and provide phased solutions to these problems. Combined effluent treatment plants may be suitable for industries located in organised industrial estates or are loc ated in c lose p roxi mit y.Th e government can allocate from the budget sufficient funds to subsidise the construction of the plants. Many industrial units once located outside are now within municipal limits. The authorities/ city governments have started asking these isolated industrial units to relocate to areas outside the municipal limits. Relocation involves a huge cost. The sponsors of such industries are perplexed. There appears to be no organised process or guidelines or government policies for overcoming

Automark Magazine | May-2011 37

such challenges. Pakistan is short of foreign exchange. One reason is its reliance on imported chemicals an d oil . Through more aggressive exploration and prospecting of mineral resources, Pakistan can substantially reduce its dependence on imported energy and mineral-based chemicals. There is a need to enhance mining activity which is not possible w it h ou t m eeti ng a nu mb er of prerequisites. Mining is a more risky business. The financiers have not been patronising this sector in the past and banks may have their reasons for being risk-averse. A specialised DFI may be set up for the evaluation and financing of projects and that will be able to make its mark if the rules and regulations of leases issued by provincial governments are amended to g ive more r elief to lend ers. The risk-averse behaviour of commercial banks suggests that for sustained economic gr ow th and long-te rm invest ment, th e cou ntr y need s development finance institutions (DFIs). These DFIs can help channelise the foreign exchange remitted by Pakistani expatriates into desirable productive sectors. In the past, the government had set up NDFC, basically to finance public sector enterprises (PSEs). A similar DFI is needed for the rehabilitation of public sector enterprises (PSEs) and funding of projects for expansion. It is expected that PSEs will stay for the time being. Many p arts of t he cou nt ry ar e u nd erd eveloped . For at trac ting industries to such areas, incentives and basic infrastr ucture are a must. Industries have the potential to help us make better use of our agriculture produce and to provide employment to the youth....

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Economic Sector - Update

State Bank warns extreme economic challenges amid rising international oil price The State Bank of Pakistan (SBP) warned of extreme economic challenges in the wake of rising international oil prices, which will lead to further energy shortfall, besides increasing social and political pressure. In its second quarterly report for FY11, the SBP while maintaining the GDP growth rate at two-three percent during the current fiscal year said that the rise in oil prices though hit global economy severely, but the impact on Pakistan could be disproportionately larger. “If political uncertainties remains and spreads further in the Middle East and North Africa (MENA) region, oil prices could increase even more sharply than the recent p ast,” th e SBP said. The report projected the average annual inflation at 14.5-15.5 percent, but said that inflationary expectatio ns are becoming engrained. Similarly, the fiscal deficit would be in the range of 5.5 percent to 6.5 percent due to high expenditures and difficulties in achieving the revenue collection target, it said. The SBP suggested four issues to be monitored closely for better outlook, including the upside in agriculture in Rabi FY11; the status of the International Monetary Fund (IMF) programme and fiscal pressure; the risk-averse behaviour of commercial banks; and oil prices. “Clearly, the uncertain investment horizon and an adverse law and order situation — related to the fight against extremism — will also strongly influence th is ou tl ook,” th e r epor t sai d. “The lack of fiscal space implies that the domestic POL prices will have to match in ternatio nal prices, which means further pressure on inflation — especially food inflation.” “Furthermore, given the increasing use of imported furnace oil for power generation, tariffs will also have to increase, which could raise social and p oli ti ca l p r essu r es,” i t a d de d. The report also pointed out the issue of

circular debt in the power sector and commodity financing, which continues to burden the fiscal side. Regarding floods that hit early this fiscal year, the central bank said that although the cotton crop and rice were adversely impacted by floods, the impact was not as b ad as initially antic ipa ted. “More importantly, there has been an upside to the floods in terms of increased area under cultivation for wheat and better recovery from sugarcane,” it added. The report said that durin g JulyFebruary FY1 1, Pakistan’s current account deficit was only $98 million against $3,027 mil lio n during the corr esp ond ing p eri od in FY 10. Stro ng dollar-denominated export growth of 20.3 percent (on the back of h i gh t ex t i le p r i c es ), sl u g g i sh manufacturing and consumer demand (reflected in the 12.7 percent growth in imports), and strong remittances (up 18 perce nt over FY10) are primaril y re sponsible for the improvement. A preliminary assessment suggests that the external sec tor wi ll remain comfortable, the report said. “We remain cautiously optimistic about the progress on the fiscal side, as shown by the recent fiscal measures to reduce the gap by Rs210 billion this fiscal year.” “Having said this, net foreign inflows in the financial account have decl ined sharply, as the stalled IMF programme has stopped inflows from other IFIs and bilateral donors. Nevertheless, the improvement in the current account has pushed Pakistan’s forex reserves to record high, while the rupee remains stable,” the report said. On the fiscal side, the government had taken meas ures by mid-March by introducing 15 percent income tax surcharge, removing general sales tax (G ST) exempti ons on fertiliser, pesticides, tractors, sugar and plant and machinery, and an increase in special

Automark Magazine | May-2011 38

excise duty from one percent to 2.5 percent. “Although these tentative steps are needed, we still think the government’s revenue targets are ambitious and maintain our projection that the fiscal deficit for FY11 will be in the range of 5.5 percent to 6.5 percent of the GDP,” the SBP said. The SBP noted that enhancing the tax base is without doubt the toughest structural reform to implement and the one that needs the greatest political will. In this scenario, the government would continue shifting its borrowing needs to commercial banks, the central bank said. The report appreciated the government to stick with the commitment to stay below its end-September 2010 level of borrowin g from the central ban k. Meanwhile, the SBP criticised the role of commercial banks for increasing exposures in government papers, which reduced the credit opportunities for the private sector. In its remarks, the SBP said commercial banks appear almost to have given up their role as financial intermediaries. “In our view, banks would be happy with this (borrowing by the government), as it reduces their risk-weighted assets, which is especially important given the increase in NPLs. The downside is that banks’ appetite for the private sector risk appears to have dried up, which is not a good omen for the economic growth and employment generation,” it said. On the revenue side, although reformed general sales tax (RGST) has become the focal point, addressing revenue leakages and glaring exemptions, eg, agriculture and ineffective taxation of properties, needs serious attention, the report added. Forecast • GDP growth at 2-3pc • Inflation at 15.5pc • Fiscal deficit at 16.5pc

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Automotive Sector - Update

Car dealers demand high premiums The menace of premium on locally assembled cars has again resurfaced following slowing down of production by the assemblers in the wake of parts shortage after the March 11 earthquake and tsunami that had affected the supply chain of key Japanese auto part vendors. Market sources said that the premium on Toyota Corolla Gli was hovering between Rs100,000-125,000, while premium on XLI version ranged between Rs50,000 to Rs100,000.Two weeks back the on-money on these cars was Rs25,000-30,000. Meanwhile dealers said that buyers were not turning up at the auth oris ed showrooms in larger numbers and even the new Corolla model was also in short supply. Some investors have also become active in the auto market. Market sources said that the premium

on Suzuki vehicles also shot up to Rs 30,000-40 ,00 0 as comp ared to Rs10,000-15,000. Dealers said that car buyers from interior Sindh were coming in larger numbers af te r making good farm incomes on various crops followed by demand in urban areas. The share of car financing through banks had fallen to 1015 per cent as most of the cars were being sold on cash basis. The government, while failing to take serious notice of price hike by the assemblers, has always remained least interested on the premium issue. Many authorised dealers were also involved in taking extra money from th e customers who could not wait one month to get deliver y of car s. Car makers had few years back asked the government to impose a six months’ ban on transfer of newly-purchased car

by the customers, but it did not work as the government felt that it was a provincial subject. Later the car makers had asked the federal government to charge extra fee from the car owner who transferred the vehicle within the six months. By doing this the government will not only get additional revenue but could also control the premium issue. Director Marketing IMC Raza Ansari said that the company had already taken administrative measures to control premium besides asking the consumers in the recent media campaign “say no to premium.” He said authoris ed dealers, prior to suspension of fresh booking from April 19, were already asked to take only one booking order from a customer. The company was also assuring the customers about the facility of car registration....

Motor Vehicle Ordinance amended to allow Qingqis The Sindh High Court (SHC) was Thursday (07-04-2011) informed that the Sindh Transport Department had amended Provincial Motor Vehicles Ordinance 1965 to allow motorcyclerickshaws, called ‘Qingqi’, to ply on their designated routes in Karachi. Advocate Munawar Ali, representing the operators of Qingqi rickshaws, submitted this w hi le c ont end ing a p et ition of motorcy cl e-rick shaw drivers, who moved to court against the harassment by Regional Transport Authority (RTA) and traffic police of Karachi. A division bench, headed by Chief Justice Mushir Alam was hearing the petitions filed by the operators of motorcycle-rickshaws and Karachi Transporters Ittehad (KTI). KTI sought direction for RTA and traffic police to stop the operations of threewheel Qingqi bike rickshaws, stating that they caused environmental as well as noise pollution and violated the environmental and traffic laws. Second

petition was moved by the operators of motorcycle-rickshaws against the RTA and DIG Traffic Karachi for allegedly harassing them. Qingqi rickshaw drivers submitted provincial authorities had allowed the operations of four-stroke rickshaws in Sindh through an official notification issued in April 2007. In pursuant to notification, motorcyclerickshaws were plying on certain link roads. They stated now RTA and traffic police were hindering their operations. They prayed to issue directions to the official respondents to start registration of bike rickshaws and issue them route permits . On Th ursd ay , Advocate Munawar Ali for petitioners placed on record a copy of government notification dated Feb 21, 2011 wherein the Sindh government in exercise of Section 69 of the Provincial Motor Vehicle Ordinance 1965, had made amendment to the article 2, clause FF of West Pakistan Motor Veh icle Rules 19 69. Th e

Automark Magazine | May-2011 39

amendment provides, Qingqi which means a motorcycle within three wheels, laden weight of which does not exceed 900 pounds avoirdupois, constructed, adapted or used for private purpose, other than for him or reward, to carry out more than four persons excluding the driver on designated routes. After hearing, SHC division bench order said: “I t a pp ear s th at th e tr ansp ort department has proposed amendment to the article 2, clause FF definition of Motorcycle Rickshaw Qingqi has been added, which is in the process of ap p ro val. L ear ned c ou nsel for petitioners has placed on record a copy of notification dated Feb 21, 2011, whereby amendment has been made. It is expected same will be published in Provincial Gazette to make it effective.” Hearing was adjourned to a date in office. ppi

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Exclusive Article on Energy Crisis

By Asif Masood

Top Leadership Have Put the Whole Nation Against the Wall Pakistan Energy Crisis “The development of the power sector is on the top of the agenda of the present government, as this plays a key role in the development and growth of a country's economy. Today, Pakistan's economic growth is seriously affected by the fast increasing gap between supply and demand of energy resources in general and electricity in particular”

Pakistan is passing through the worst Energy Crisis, only because of poor policies and worst planning of current government. The government was fully aware of the situation from day one and yet it failed to overcome the energy crisis. In his speech at the Joint Session of Parliament on April 5, 201 0 said, “We realize the suffering that loadshedding causes our people. We are painfully aware of the darkness it spr eads, h ow child ren study by candlelight, and how the wheels of industry often stop”. Afte r serious concern showed by President of Pakistan (but did nothing till todate). The tall claims by our Prime Minister Syed Yusuf Raza Gilani on the issue, at the inaugural ceremony of the 62 Megawatt Gulf Rental Power Plant on May 23, 2010 said, the government's power sector vision to increase total generation capacity from the existing

20,000 MW to 40,000 MW. “The development of the power sector is on the top of the agenda of the present government, as this plays a key role in the development and growth of a country's economy. Today, Pakistan's economic growth is seriously affected by the fast increasing gap between supply and demand of energy resources in general and electricity in particular” (It is not clear whether through this statement of Prime Minister was implicitly challenging the findings of the third party auditor on rental power projects or). But the fact remains that, today half of the population in Pakistan has no reliable and affordable electricity supply. In particular the inhabitants of about 100,000 villages in rural areas have to rely upon candles and lamps for basic energy needs. Total Power Generation Capacity of Pakistan (including all sources) is 19855 MW and the electricity demand (as of today 03-05-2011) is 14500 MW and PEPCO is merely generating 8000 plus MW. Due to gravity of present situation and rising deman d for power the shortfall has crossed more than 6000 MW. According to the former chairman WAPDA, Engr Shams ul Mulk, there is no electricity shortage present in the country. The install capacity of and the present electricity crisis is the result of

non-pa yment (of circular debt) to the IPPs. But according t o t he F o r me r Minister for Power, M r Ra ja Per vai z A sh raf “th e total Asif Masood circular debt was to Chief Technical officer be paid to these IPPs ENERCON / ECF by June 2010, but the government has no fiscal capacity to finance the debt at this time. It is approaching the financial institutions to twist out from the circular debt”. According to official claims of ministry, after the debt is cleared the IPPs will function smoothly to meet the demand levels (But nobody knows when)? Pakistan is a mess. It is controlled by a cadre of active and retired military and civil personnel in collusion with landlord Politicians. This elite class controls the country’s biggest and most important businesses, and holds most of the political power as well. All decisions are based on what serves their interest. For example, in January 2006, the federal cabinet approved the construction of five large dams by 2016, including Kalabagh. But rather than starting with Kalabagh as expected, it decided to go for a dam upstream at Diamar-Bhasha, which hadn’t even had a feasibil ity report. (The other planned dams were not ready for construction either.) The reason for Diamar-Bhasha’s approval was to avoid political controversy in Sindh Province that could adversely affect the re-election prospects of the Pakistan Muslim League (Q), the party in power, in the general elections scheduled for late 2007. What happened afterwards and how events took their

Automark Magazine | May-2011 40

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Exclusive Article on Energy Crisis

Corruption is another major element otherwise there is no dearth of investors in Pakistan and abroad who have the capacity to set up and operate power plants, and no one minds making a handsome profit. And the official governmental policy gives extremely generous incentives, including no income tax and guaranteed return up to 15 %. own course is history. To summarize, some of the fundamental reasons, for the embarrassing state that we are passing through is presented below:

• Leadership crisis, Lack of vision, Lack of political will, Chronic One man rule (even in the civilian set ups or so called democratic setups) • Elite and Privileged class who are narrow minded and look for the short term gains. There is complete lack of care and apathy among the elites and they are not answerable to anyone. There is no level playing field for business • Destruction and decay of Institutions, lack of transparency and accountability, corruption and lack of or Poor Planning • Structural melancholy of the Society, monopolization, narrow and shallow life values, feudal and lordship mentality, provincial and ethnic tensions stoked by narrow minded elite class • Absence of Rule of Law, with no individual liberty, protection of property rights and no peace and security. According to Dr Khalil Ahmed, the public reaction states that “we are living in a Guantanamo Bay of uncertainty and says even if we do not resort to unruly economic, social, moral,

psychological behavior, we feel depressed to the core of our deepest selves and what is more dangerous is that our trust in the system, nation and country evaporates in the air, transforming us, the lowly citizens of this elitist country into neurotic and psychotic beings”. Corruption is another major element otherwise there is no dearth of investors in Pakistan and abroad who have the capacity to set up and operate power plants, and no one minds making a handsome profit. And the official governmental policy gives extremely generous incentiv es, including no income tax and guaranteed return up to 15 %. The problem is that by the time a potential investor is through paying the bribes to the relevant ministers and his subordinates, the project feasibility has gone through the roof. The multidimensional ongoing energy crisis has been having a knock on the life of every Pakistani. Without sufficient energy the wheel can't run on roads, industry and agriculture can't sustain, hospitals and operation theaters can't function, even schools and laboratories can't work, public and private sector businesses can't operate. Electricity, which is th e lifeblood of modern societies, provides a wide range of services essential to everyday life, including running hospitals, schools and businesses, heating, cooling and lighting in homes and in work, preserving food commercially and at home, pumping fresh water supplies and sewage, maintaining the flow of traffic, operating

Automark Magazine | May-2011 41

communications systems and providing power for a wide range of appliances. There is chronic and persistent lack of planning in Pakistan or as they say “Poor Planning leads to Poor Performance”. Pakistan has a huge capacity for hydropower and large deposits of coal. Hydro electricity is the cheapest source of energy and by building small hydel projects in addition to mega dams; the feasibility of which already exist. We can add 50,000MW in our National Grid. It is ironic that Pakistan has fourth largest coal reserves in the world but the actual share of coal is only about 2% in energy share. Pakistan has track record for being slow to exploit these resources. Institutional decay and breakdown is the answer. For example in 1990s, w hile constru ction on Kalabagh was delayed, successive prime ministers, including Benazir Bhutto, did not even order the national Water and Po wer Development Authority to prepare feasibility studies on other dam prop osals. When serious p ower shortages occurred in the 1990s, Bhutto embraced thermal power projects backed by foreign investors. There was talk of kickbacks in return for generous terms. The cost to Pakistani masses was heavy. Does anyone care? Electricity in Pakistan is generated, transmitted, distributed and retail supplied by the government of Pakistan. That is, it has complete monopoly over the retail and near total monopoly over production directly and complete control indirectly by controlling the private sector. Th is lead s to co rruption, nepotism, favoritism, personal gains and political short termism with not rega rd t o pl anning for fu tu r e.

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Automotive Sector - Exclusive Article

by Omar Rashdi from St. Patrickâ&#x20AC;&#x2122;s Technical Institute

Differential

A vehicle's wheels rotate at different speeds, mainly when turning corners. The differential is designed to drive a pair of wheels while allowing them to rotate at different speeds. In vehicles without a differential, such as karts, both driving wheels are forced to rotate at the same speed, usually on a common axle driven by a simple chain-drive mechanism. When cornering, the inner wheel needs to travel a shorter distance than the outer wheel, so with no differential, the result is the inner wheel spinning and/or the outer wheel dragging, and this results in difficult and unpredictable handling, damage to tires and roads, and strain on (or possible failure of) the entire drive train. the differential because it can drive the driving wheels at different speeds. In rear wheel driv e, differential is separately used but in front wheel drive the transaxle is used. Transaxle is a major mechanical component that combines the functionality of the transmission, the dif ferential and associated components of the driven axle into one integrated assembly. Formation like these require long hour of intensive drilling and careful judgment. When the driver goes around the corner, the wheel on the outside of the turn has to adjust their speed to keep even with the wheel of the inside. The wheel on the outside has to move faster in order to keep up with the turn. The outside wheels must spin faster than the wheels on inside because they have the greatest distance to travel in the same link of time. When the vehicle turns a corner the wheels can travel at different speeds because each one can turn freely on the axels and in the early automobiles the driving wheel turn separately and only one wheel was connected to the engine but when only one wheel was driven by the engine it had to do all the work and it couldnâ&#x20AC;&#x2122;t get the good enough grip on the road to do its job properly, so the one wheel drive soon out of date. But if two wheels are locked on an axel so they are not free to turn separately, one or the other has to slide, so engineer had to find the way to connect both driving wheels to the engine without slidin g and slippin g on the turns. The device which makes this possible is the part of the driving axel; it is called

The differential has three jobs: - To aim the engine power at the wheels - To act as the final gear reduction in the vehicle, slowing the rotational speed of the transmission one final time b efore it hits the whe els - To transmit the power to the wheels while allowing them to rotate at different speeds (This is the one that earned the differential its name.) For the non-driven wheels on your car -- the front wheels on a rear-wheel drive

car, the back wheels on a front-w heel drive car -- this is not an issue. There is no connection between them, so they spin independently. But the driven wheels are linked together so that a single engine and transmission can turn both wheels. If your car did not have a differential, the wheels would have to be locked together, forced to spin at the same speed. This would make turning difficult and hard on your car: For the car to be able to turn, one tire would have to slip. With modern tires and concrete roads, a great deal of force is required to make a tire slip. That force would have to be transmitted through the axle from one wheel to another, putting a heavy strain on the axle components.

4WD Differential A 4WD differential allows one input shaft to drive two ou tp ut shafts independently with different speeds. The differential distributes torque (angular force) evenly, while distributing angular velocity (turning speed) such that the average for the two output shafts is equal to that of the differential ring gear. Each powered axle requires a differential to distribute power between the left and the right sides. When all four wh eels ar e driven, a third differential can be used to distribute power between the front and the rear axles.

Automark Magazine | May-2011 42

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Automotive Sector - Update

World lubricants consumption to reach 10.5 billion gallons by 2015 UAE becoming preferred exporter to region Gr ow ing veh icle owner sh ip and increasing industrial development are bringing about a sea of change in the global marketplace for lubricating oils and greases. While demand in the developed countries has either slowed down or remained relatively unchanged, the emerging economies are leading the growth surge according to industry research by Global industry Analysts. According to the report, the global market for lubricating oils and greases, wh ich includes both commercial automotive and industrial lubricants, is expected to be 10.5 billion gallons annually by 2015. Growing demand from BRIC countries, Central Asia and Africa is anchoring the increase in the lube market*, which has led to a spurt o f i n t er e st i n t h e u p c o m i ng Automechanika Middle East in Dubai, th e region' s prem ier tr ade and networking event for the automotive aftermarket. "Global suppliers and buyers from around North and East Africa, the countries of the former CIS (Azerbaijan, Kazakhstan, Uzbekistan, Turkmenistan, Kyrgystan and Tajik istan), Ir an , Pakista n, India and oth ers ar e expressing interest in sourcing out of the UAE, Qatar, Kuwait and Saudi Arabia," said Mr. Ahmed Pauwels, Chief Executive Officer of organiser Epoc Messe Frankfurt. "The UAE especially has grown in significance as a major re-exporter and supplier of automotive and industrial lubricants, with reports indicating that the volume of exports has increased by 100 % over the past few years**. Automechanika Middle East is expecting to attract a large part of this growing interest, thanks to its extensive line-up of leading manufacturers and suppliers of lu br ic ants," Pau w els ad ded . Mr. Jimmy Horriatt, BG Middle East,

exhibitor at Automechanika Middle East 2011, said: "Due to qualities of fuel and lubricants in the Middle East market, the region is an extremely important market to BG. The opportunity here for growth and maintaining market share for BG products is tremendous. Brand awareness, the introduction of new products, attracting new customers from dealerships and supporting our existing regional distributors are amongst our key aims for participating." The BG products are used by removing and cleaning harmful deposits which solve drivability and problems associated with engine performance, transmission, fuel and air inducation, power steering systems, colling and brake systems. Nicolas Scholler, Sales & Business Development Manager Trademarks, Wolf Oil Corporation NV, who has an annual production of 83,000 MT of automotive lubricants, said: "The Middle East represents in our sales a total share of 12% in 2010 and we feel there are strong growth opportunities. We have been exhibiting at Automechaniaka Middle East for three years and want to confirm our presence in these markets. The aim of our participation is to reinforce existing relationships or to meet new potential distributors for countries in this region. We are looking for strong partners interested in a long term relationship." Wolf Oil Corporation will be showcasing its two main brands Wolf and Champion and its ESP range of products, which cover the latest developments in the lubricants industry. Mr Salvatore Coniglio, Regional Area Manager for German-based company, LIQUI MOLY, commented on their participation at Automechanika Middle East: "We want to in crease brand awareness in the region as in the Middle East we are not as famous as we are in Europe yet. The Middle East is a

Automark Magazine | May-2011 43

prosp ering region with fantastic potential. Automechanika is a good opportunity to get in touch with other business people. For example, we are looking for an importer in Oman. We see that car owners' buying behaviour is changing to using more and more high qual ity products . This is a great opportunity for us because we offer those h igh quality products w ith everything manufactured in Germany." During the event LIQUI MOLY will be exhibiting its range of motor oils as well as its revamped car care series which it is introducing for the first time to the region. The entire product portfolio including the car chemical sector will be on display at the event and LIQUI MOLY will demonstrate how car drivers can reduce their ecological footprint by using their products. A recent market trend is that lubricants from the UAE are gaining popularity and market share in the rising markets around the immediate region and beyond. Today, a significant part of the demand from CIS, Afgh ani stan, Pakistan, India, Sri Lanka, Bangladesh and Africa is being fulfilled by UAE suppliers. Amongst exhibitors featuring at this year's edition of Automechanika Middle East within the lubricants sector include: LIQUI MOLY, Wolf Oil, Eurol BV, Lubplu s, Lubr ex, Lucas Oil, BG Products, Accor Lubrifiants, Axxon Oil, CEPSA and Iyad Odeh Trading LLC to name a few. Automechanika Middle East 2011, which will run from June 7th to 9th at the Dubai International Convention and Exhibition Centre, will also feature exhibitors from the tyres & tubes, workshop equipment, batteries, parts & systems, repair & maintenance and accessories & tuning industries. ...

AUTOMARK MAGAZINE

Automotive Sector - Update

Auto industry finalizes recommendations on AIDP The automobile industry has finalized its recommendations for the upcoming five-year auto industry development plan (AIDP). The plan, jointly pre pared by the Pakistan Automotive Manufacturers Association (PAMA) an d Pakistan A ssoc iat ion of A u to P art s and Accessories (PAAPAM), emphasizes the need of a balanced policy for import for used cars and continuation of a longterm balanced policy rather than short ones. The current auto-industry development plan will expire in 2012 after which a new five-year plan will be implemented. The auto industry insisted that the present tax rate needs to be maintained for the development of the sector. The production capacity of new cars is

targeted to reach around 380,000 annually by 2017 against the current capacity of 300,000 units. Industry sources tell that the current capacity is of 300,000 units, but during the year 2011 the production will stay around 160,000 units. It also proposes to impose duty and tax on the basis of weight instead of units in order to curb under invoicing and misdeclaration. Ind us Motor Dir ector Sales and Marketing Raza Ansari said that if the suggestion to waive import duty on specific items is not accepted, it will result in increase of Rs 40,000 to Rs 50,000 in cars prices. Implementation of the plan can improve the production capacity of the auto industry and help solve lift the country’s

economy, he added. Mr. Qaim Automotive Manufacturing CEO M. A. Jabbar said that the plan on hold for the last two years, has resulted in th e su spensio n of local parts production. The government’s friendly policies to international parts suppliers have affected the local production of parts massively, he added. He said that recommendations have been presented to the government and requested to be implemented in the upcoming budget. He said that due to SRO culture in the country, important plans of national level are affected. He added that the new proposed plans related to localization can help control the increasing prices of locally manufactured cars.

PIA 'Emergency Response Centre' inaugurated Pakistan Internat-ional Airlines (PIA) Eme rgency Response Centre was inaugurated by Nadeem Khan Yousufzai, Managing Director PIA. Whil e PIA pays utmost attentio n towards passenger care and takes every step to make its operation safe and sound, considering the eventualities arising from weather disruptions and other factors, it has established a state of the art facility to manage the exigencies in a co-ordinate d and organised manner. This ERC is first of the sort not only in Pakistan but in the Saarc region as well. Describing the main features of the centre on the occasion, Capt. S. Adnan Haris, Chief Pilot Safety & QA highlighted that the centre has got dedicated work stations with full IT Support for different departments in the command and control centre. Speaking on the occasion, Nad eem Kh an Yousufzai expressed his satisfaction over the emergency preparedness level of the airline and offered its utilisation to other local and international carriers operating in the country. He also invited other

PIA Emergency Response Center (ERC) inaugurated by Nadeem Khan Yousufzai, MD PIA at Airline's Head office. Deputy MD PIA, Salim Sayani, Director HRA & C, Shahnawaz Rehman, Director Flight Operations, Captain Illyas Malik, Chief Pilot Safety & Quality Assurance, Captain S. Adnan Haris and other senior officials of the airline are also present on the occasion. national institutions to get full advantage of the centre in handling emergencies in their organisations as well. He termed th e ERC a na tiona l a sset and congratulated PIA team members for their dedicated efforts in this regard. The ceremony was also attended by

Automark Magazine | May-2011 44

Deputy Managing Director PIA, Salim Sayani, Director HRA & C, Mr. Shahnawaz Rehman, Director Flight Operations, Captain Illyas Mal ik, Director Informatio n Technology , Irshad Ghani and other senior officials of the airline.-PR

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Automotive Sector - Update

APMDA Press Release

Proposals for Budget 2011 - 2012 By Pakistan Motor Dealers Association (APMDA) The local assemblers are enjoying the monopolistic and consumer unfriendly benefits of a ban of used vehicles import for the last many years. They fleece common people in the shape of 100% advance payment at the time of booking of a car and the delivery of a car takes three months to six months! As a result of delays in car delivery, the black marketer charges a hefty premium “on money” from innocent people. Th ese s u gg es ti on s, w h i c h a re enumerated below, will help alleviate the problems the common man is facing due to the sharp increase in the price of vehicles over the last couple of years. All Pakistan Motor Dealers Association (APMDA) also make these suggestions as important stakeholders in Pakistan’s auto industry, hoping to provide a lifeline to an industry severely affected by the economic downturn of the recent years. In 2005-2006 import of used vehicles which was permitted after a long gap of 12 years. This w as subsequently restricted to import of used vehicles of three years old only in different schemes, as a result of which local assemblers acquired a monopoly on prices and supply, and the freedom of choice of consumers was severely restricted. In light of the above, the APMDA would like to make the following proposals for Budget 2011-2012. 1- Allow commercial imports of used vehicles of up to 10 years of age vehicles. Allowing commercial imports , in addition to existing schemes for the imports of used vehicles like Transfer of Residence Scheme, Gift Scheme and Baggage Scheme, would be in line with the Government’s policy of the documentation of the economy. It would bring the imports of used vehicles business into the tax net and will help the Government expand its tax base. We suggest that only the certified members of APMDA should be allowed to im port the u sed vehicles on co mmercial bas is for the sak e of transparency of the trade. The existing schemes for the imports of used vehicles are for the facilitation of overseas Pakistanis. It is recommended that in Transfer of Residence scheme there should be no restriction of age lim it for th e imp ort of vehicle. The local assemblers are enjoying the monopolistic and consumer unfriendly benefits of a ban of used vehicles import for the last many years. They fleece

common people in the shape of 100% advance payment at the time of booking of a car and the delivery of a car takes three months to six months! As a result of delays in car delivery, the black marketer charges a hefty premium “on money” from innocent people.They arbitrarily increase the price for their car as and when they desire, resulting in significantly greater financial burden for the common man and profits for the auto assemblers than our neighboring countrie s. The promised levels of deletions have also not been achieved, despite the passage of many years. 2- Regulatory duty income decline has been a huge revenue loss, which is verifiable from all the Collectorates of Customs. We would like to draw your kind attention towards the problems faced due to issuance of C.G.O. 01/09 dated 13-01-2009. This Notification has deprived the legal, social and ethical right to obtain the depreciation @2% per month on old and used vehicles of above 1800cc imported by Overseas Pakistanis. This facility was available for the last 30 years, before it was abruptly withdrawn. As per current S.R.O. the depreciation on the Taxes and Import value of old used vehicle is @ 1% per month. The importers are

Automark Magazine | May-2011

already high tariff rate on account of Regulatory Duty @ 50% on the vehicles of above 1800cc (Cars & Jeeps) and devaluation of currency. For the record, it is important to note that the local assemblers are not assembling cars of above 1800cc. The imports of above 1800cc cars and jeeps would not hurting the local auto assemblers, unless they are charging an unfair profit on their smaller capacity vehicles. 3- The government should impose a fixed rate of duty on the import of used vehicles of engine capacity of above 1800 CC. It may be mentioned here, that used vehicles up to 1800 CC were already subjected to fixed rate of import duty. It would help the government check the revenue loss suffered due to arbitrary fixing of import duty and will help to eliminate the variation of taxes in all the ports of country. In that result the collection of taxes will be increased. The simplif ication of the import procedure of used vehicles of all engine capacities and the fixation of duty for all used vehicles would be in line with the good governance policy pursued by the present Government. This would also help the government to enhance its tax base as well as the volume of revenue...

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Automotive - Exclusive Article

by Syed Haider Mehdi Automotive Engineering, NED University

CARS, WHAT FUTURE? PART 01

Science and technology has brought a real revolution in every pole of life, things beyond assumptions in the past centuries have been achieved through scientific and engineering technical approach. Travelling or mobility has been an important objective for mankind since the beginning of time. This object had greatly been achieved in the 18th century, when the first steam engine made a major impact on the life-style of the human race. It is an undeniable fact that Automobile has now become an important, trusted and valuable servant of the people in all over the world. Science is enabling people to build enormous technological progress in all fields, including those of automobiles. Imagine a car that runs only on high speed with no pollution and no noise. Imagine a car driven by your thoughts. Imagine using water or air to power or drive your vehicle. Imagine a supercar that moves and reaches to its destination in the blink of an eye. Today we have entered the wonderful land of the future of cars, where the possibilities are endless and anything is possible. Cars in the future will develop to run easier and faster than ever before, becau se tech nologies ar e b eing constantly developed by automakers. While more mainstream technologies like hybrid cars and hydrogen car continue to push the edges of todayâ&#x20AC;&#x2122;s car technology, all new innovations will be introduced in the future. Today with increasing the use of limited fossil reserves, there is a need to use abundant and renewable resources as fuel. In many ways hydrogen is an ideal fuel for future. Hydrogen is more efficient as a source of fuel than gas oline. Hydrogen gas has a higher energy density per unit mass than gasoline does, and also has a lower energy density per unit volume. This means that hydrogen fuel cell cars would need much less fuel to move greater distances than cars powered by gasoline would be able to. Hydrogen can be produced from oil, natural gas, and coal. These sources are the variety of uses that would be a very cost efficient way to produce pure hydrogen. Another way is through the electrolysis. Electrolysis is the process

of running electricity through water to separate the hydrogen from the oxygen. While this method is not as cheap as the first, it is still very efficient. Although in the coming era, water will also be used as fuel source. There are two techniques available to use water to power a vehicle. The first method is to convert water into steam through boiler, which drives the turbine to produce mech an ical energy by the steam pressure. This mechanical energy will be converted into electrical energy to drive the vehicle. The second technique is to directly produce hydrogen gas from water through electrolysis. Since converting an Internal Combustion Engine into an engine running by the water is not an easy task for Engineers. However, in last 1990, Engin eers discovered the water again, so to speak. Water is composed of hydrogen and oxygen and hydrogen in water can be extracted to power the car. The purpose of all cars is to develop efficient methods and inexpensive to use water as fuel for vehicles, so its future car running with water in th e next 7 or 10 years . Hybrid cars are often considered as the 'car of the era'. Hybrids are vehicle that run off a rechargeable batteries and gasoline, rather than just gasoline. Hybrid batteries help to decrease fuel emissions because the hybrid engine draws on the battery and not gasoline when accelerating. Hybrid uses both an engine and electric motors. The energy that runs the electric motors stores in recharge able batteries. There are actually two types of hybrid car, parallel hybrid and series hybrid car. In a parallel hybrid car, a gasoline engine and an electric motor work jointly to move the car forward, while in a series hybrid, the gasoline engine either directly powers

an electric motor that powers the vehicle, or charges batteries that will power the motor. Electr ic hybrid motors can ta ke th e ki neti c energy that comes from applying the brakes and charge the battery. This system is called a regenerative braking system. Workin g with in ertia and torque, magnets on the motor shaft to move the electric coils on the stator producing electricity. This electricity becomes electrical energy that recharges the battery pack. Hybrids are better than all-electric cars because hybrid car batteries recharge as you drive so there is no need to plug in. These cars are smaller and lighter than regular cars and aerodynamic because by removing the extra weight, the car gains more gas mil eage. Lik e al l other countrie s, Pakistani students are also introducing the new technologies in the country. The students of NED University studying in Automotive Engineering have recently designed the first environment friendly hybrid car that runs with combination of batteries and engine. Another fuel for future is Biofeuls. Biodiesel (fatty acid alkyl esters) is a cleaner burning diesel replacement fuel made from natural, renewable sources such as vegetable oils and animal fats. Just like petroleum diesel, biodiesel operates in CI engines. The oils are first fi lt er ed to r em ov e w a t er a nd contaminants and are then mixed with an al cohol (usually methanol) and catalyst such as sodium hydroxide. This breaks u p the oil mo lecules and produced the methyl ester and glycerin (as a bi product) and then further p u r i f i e d . B i o d i e se l p r o d u c e s considerably less emissio ns than petroleum diesel; as much as a 10% carbon monoxide reduction, and unburned Biodiesel by 75% compared to petroleum diesel, and carbon dioxide emissions can be reduced by 18%. No doubt, those cars running on these sources of fuels can bring the real revolution in the Auto world â&#x20AC;Ś..

Automark Magazine | May-2011 46

AUTOMARK MAGAZINE

Car / Light Vehicle Price List

SUZUKI

HONDA

Model MEHRAN VX 800cc MEHRAN VX (CNG) 800cc MEHRAN VXR MEHRAN VXR (CNG) ALTO VX 1000cc ALTO VX (CNG) ALTO VXR ALTO VXR (CNG) SUZUKI SWIFT 1.3L PETROL CULTUS Efi VXRI CULTUS Efi VXRI (CNG) LIANA 1.3L RXI MT PETROL LIANA 1.3L RXI MT (CNG) LIANA 1.3L LE MT PETROL LIANA 1.3L LE (CNG) RAVI PICKUP ST308R VX RAVI PICKUP ST308R VX CNG BOLAN VAN VX Petrol BOLAN VAN VX CNG BOLAN VAN VTR PETROL BOLAN VAN VTR CNG SUZUKI VAN CARGO APV 1.5L JL SX MT (CBU) APV 1.5L JL DX MT (CBU)

Price Rs. 481,000 Rs. 533,000 Rs. 534,000 Rs. 584,000 Discontinued Discontinued Rs. 693,000 Rs. 748,000 Rs. 1,113,000 Rs. 891,000 Rs. 938,000 Rs. 1,205,000 Rs. 1,276,000 Rs. 1,175,000 Rs. 1,246,000 Rs. 508,000 Rs. 564,000 Rs. 562,000 Rs. 604,000 Rs. 620,000 Rs. 682,000 Rs. 537,000 Rs. 1,805,500 Rs. 1,956,000

Honda Honda Honda Honda Honda Honda Honda Honda

Model CRV Automatic 2400cc Japan Accord Automatic 2400cc Japan City Manual HYUNDAI City Automatic Civic VTEC Manual Civic Oriel Manual Civic VTEC Prosmatec Civic Oriel Prosmatec

Price 5,566,000 5,966,000 1,379,000 1,515,000 1,735,000 1,920,000 1,860,000 2,000,000

TOYOTA COROLLA Model XLi 1.3 VVT-i GLI 1.3 VVT-i 2.OD STD 2000cc 2.OD SALOON M/T 2.OD SAL SUNROOF ALTIS 1.8 VVTi M/T ALTIS 1.8 VVTi A/T

Price Rs. 1,357,000 Rs. 1,482,000 Rs. 1,459,000 Rs. 1,794,000 Rs. 1,884,000 Rs. 1,730,000 Rs. 1,815,000

Hilux Pickup 4x2 Model

Price

Brand New Toyota Hilux Pickup, 4x2, Single Cabin, (Local Assembled) Standard Model

Rs. 1,519,000

Hilux Pickup 4x4 D/C

CHEVROLET Model CHEVROLET JOY CNG CHEVROLET JOY Petrol

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Price Rs. 569,000 Rs. 539,000

Model

Price

Toyota HILUX 2494cc, Diesel Turbo Charger Common Rail Engine, 4x4 Double Cabin

Rs. 2,404,000

NISSAN CARS Model Sunny Ex-Saloon 1.6L M/T Sunny Ex-Saloon 1.6L CNG S. Super Saloon 1.6L M/T S. Super Saloon 1.6L CNG S. Super Saloon 1.6L A/T NISSAN S. S. Saloon 1.6L A/T CNG

Price Rs. 1,225,000 Rs. 1,305,000 Rs. 1,370,000 Rs. 1,450,000 Rs. 1,470,000 Rs. 1,550,000

NISSAN DIESEL TRUCKS Diesel Truck PKB 211 Diesel Truck PKD 411H Diesel Truck PKD 411E Diesel Truck PKD CD 411 Diesel Prime Mover CWM 454

Rs. 3,000,000 Rs. 4,150,000 Rs. 4,260,000 Rs. 4,600,000 Rs. 5,500,000

CHERY QQ Model CHERY QQ Petrol CHERY QQ CNG

DAIHATSU Model CUORE CX CX ECO (CNG) CX AUTOMATIC

Price Rs. 588,000 Rs. 628,000

LAND ROVER

Model Price DEFENDER Rs. 7,59,000 (90 S/WJEEP STD) Rs. 8,09,000 (110 S/W A/C) Rs. 8,70,000 (90 Soft Top) Price updated May- 2011

Price Rs. 2,269,431 Rs. 2,545,000 Rs. 2,150,260

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May-2011

AUTOMARK MAGAZINE

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Automotive Sector - Article

Composed by: Muneeb Jawed Automotive Engineering NED Uuniversity

Honda City - Great Features There are mainly four petrol variants of this car- EMT, VMT, SMT and VAT. All these variants are powered by I-VTEC engine which generates the maximum power of 116 BHP. This engine delivers great fuel economy, high output and the eco-friendly performance. The Honda City offers two choices for transmissions; 5-speed manual and the 5-speed automatic.

Honda City is a car which is the perfect blend of performance, style, comfort and luxury. When you think of car, style, comfort, luxury and performance are the factors which come to your mind at once. A car with all these features gives the power to the owner. Honda City is a car which is the perfect blend of performance, style, comfort and luxury. This third generation car is priced between Rs. 9.09 lacs to Rs. 14.73 lacs. The look of this car catches the attention of the passersby on the road. Apart from the looks, its performance is something which makes the heads turn. It has graceful features such as the five spoke alloy wheel and the stylish fog features. This sedan is known for its great performance on road and advanced safety features. It is designed with advanced technology and great quality components. This car has always been the first choice of the consumers who looking for the sedan in midsiz ed segment. This car is designed with unique 'Arrow Shot Form' design wh ich is revolutionary style. of this car are spacious and are ad or ned with convenience features. There are mainly four petrol variants of this car- EMT, VMT, SMT and VAT. All these variants are powered by I-VTEC engine which generates the maximum power of 116 BHP. This engine delivers great fuel economy, high output and the eco-friendly

performance. The Honda City offers two choices for transmissions; 5-speed manual and the 5-speed automatic. This car offers good pick up and stressfree acceleration. The handling of the car is effortless like its predecessor. The McPherson Strut front suspension and rear torsion suspension together give great ride comfort. The styling of this car is designed according to the Indian markets. Its A rr ow Sh ot For m g iv es i t a n aerodynamic appearance that cuts through the air. It has stylish front fog lamps, front and rear mud guards,

chrome door handles and sporty exhaust finishers. interior of this car is very spacious and stylish. The thoughtfully designed inte riors have the abundant and elegant features. It has high quality fabric seats which add to the elegance of the interiors. Other features include MP3 capability, iPod support, plugging in of cell phone, USB memory stick input and more. The in strume nt cluster is done with a metallic tone and dashboard has the dual tone look. The safety features of this car include Anti-lock braking system, with Brake Assist, s e at b e lts wi th p r e tensioners, Dual SRS airbags and rigid car bod y w it Honda G-contro l Technology. Honda City features make this car popular among the consumers in Pakistan....

Automark Magazine | May-2011 49

AUTOMARK MAGAZINE

MADE MADEIN INPAKISTAN PAKISTANMOTORCYCLES MOTORCYCLES PRICE LIST LIST RETAIL PRICE

70cc Motorcycle

Sr./ No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

Product & Model Name Aan AI-70 Asia Hero AH-70 Bionic AS-70 Crown Lifan CRLF-70 Challenger BA-70 Diamond SD-70 Dhoom YD-70 Eagle DG-70 Ghani GI-70 Guangta GT-70 Grace CT-70 Hero RF-70 Hero RF-70 Plus Habib HB-70 Honda CD-70 Hi-Speed SR-70 Jinan JN-70 Leader LD-70 King Hero KH-70 Moon Star MT-70 Master MD-70 Metro Hi-Tech MR-70 New Asia NA-70

Retail Price Rs. 42,500/= Rs. 41,000/= Rs. 41,000/= Rs. 42,000/= Rs. 40,000/= Rs. 40,000/= Rs. 49,000/= Rs. 39,000/= Rs. 45,000/= Rs. 41,000/= Rs. 41,000/= Rs. 46,000/= Rs. 47,000/= Rs. 41,000/= Rs. 65,500/= Rs. 42,000/= Rs. 40,500/= Rs. 40,500/= Rs. 40,500/= Rs. 40,500/= Rs. 40,500/= Rs. 42,900/= Rs. 40,000/=

Sr./ No. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45.

Product & Model Name Pak Hero PH-70 Ravi Premium R1 Ravi Hamsafar-70 Road Prince RP-70 Royal Star RS-70 Royal RL-70 Racer AS-70 Safari SD-70 Sakai SK-70 Star DL-70 Sohrab JS-70 Sonica SM-70 Super Asia SA-70 Super Star SS-70 Super Power SP-70 Super Power Delux Toyo TG-70 Target TT-70 Unique UD-70 Union Star US-70 United US-70 Zxmco ZX-70

Automark Magazine | May-2011 50

Retail Price Rs. 42,500/= Rs. 47,000/= Rs. 43,000/= Rs. 41,000/= Rs. 41,000/= Rs. 42,500/= Rs. 41,500/= Rs. 40,000/= Rs. 39,000/= Rs. 39,900/= Rs. 41,500/= Rs. 42,400/= Rs. 39,500/= Rs. 40,500/= Rs. 40,500/= Rs. 45,000/= Rs. 41,000/= Rs. 40,000/= Rs. 41,000/= Rs. 42,000/= Rs. 40,000/= Rs. 42,000/=

Price updated April-2011

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MADE IN PAKISTAN MOTORCYCLES PRICE LIST

125cc Motorcycle No. 1. 2. 3. 4. 5. 6. 7. 8.

Brand & Model Name Habib HB-125 Sitara ST-125 Super Star SS-125 Hero RF-125 Honda CG-125 STD Honda CG-125 DX Metro MR-125 Ravi Storm-125 Euro II

Retail Price Rs. 88,000/= Rs. 55,000/= Rs. 54,000/= Rs. 75,000/= Rs. 89,500/= Rs. 111,000/= Rs. 55,500/= Rs. 78,000/=

Yamaha Motorcycle Product & Sr./ Model Name No. 1. Yamaha YD100 2. Yamana Yama4 3. Yamaha YB100 Royale

Retail Price Rs. 75,900/= Rs. 72,000/= Rs. 72,900/=

100cc Motorcycle No. 1. 2. 3. 4. 5. 6. 7.

Brand &Model Name Ghani GI-100 Habib HB-100 Honda CD-100 Sitara ST-100 Super Star SS-100 Super Power SP-100 Unique UD-100

Retail Price Rs. 55,500/= Rs. 55,000/= Rs. 73,900/= Rs. 55,000/= Rs. 45,000/= Rs. 55,000/= Rs. 60,000/=

Suzuki Motorcycle Product & Sr./ Model Name No. 1. Suzuki Sprinter ECO 2. Suzuki Sprinter STD. 3. Suzuki GS-125 4. Suzuki GS-150 5. Suzuki Shogan

Automark Magazine | May-2011

Retail Price Rs. 69,000/= Rs. 72,000/= Rs. 82,900/= Rs. 89,100/= Rs. 79,500/=

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