LAHORE: Ghandhara Tyre & Rubber Company Limited has notified the Pakistan Stock Exchange that it will observe non-production days from February 13 to February 17. The company will recommence operations on February 20.
The company has blamed the unwillingness by commercial banks to issue it letters of credits as the main reason for the plant shutdown. Ghandhara Tyres states that this unwillingness has disallowed the company from obtaining the necessary raw materials to carry out its production activities.
Hussain Kuli Khan, CEO Ghandhara Tyre & Rubber Company Limited, had already highlighted the issue earlier this week in conversation with Profit. “The Government should allow the opening of letters of credit (LCs) for raw materials, as most of the raw materials are imported. The Government would ultimately save forex as the local value addition is very high at around 40%,” said Khan.
Khan had stated this as part of this three-part solution to resolving the ongoing crisis across the domestic tyre manufacturing industry.
Read more: Tyre industry fears closures due to shutdowns across auto industry
The Letter of Credit Fiasco
The issues pertaining to the letters of credits goes back to May 20, 2022 when the State Bank of Pakistan extended its administrative oversight over all imports in the automotive sector. It did so through EPD Circular Letter No. 09 of 2022 in a bid to stabilise Pakistan’s wavering balance of payments.
The measure was revoked by the State Bank on December 27, 2022 through EPD Circular Letter No. 20 of 2022. However, the State Bank of Pakistan had told commercial banks to prioritise issuing letters of credits for those imports that were essential to the economy.
Speaking to Profit when the State Bank issued the circular, Munir Bana, Chairman of the Pakistan Association of Auto Parts & Accessories Manufacturers, stated “The auto industry is not an essential item and therefore our imports will continue to be controlled and rationed by SBP”. Profit had highlighted how the circular left room for opacity, and subsequently left many onlookers from the automotive sector in the dark. Ghandhara Tyres seems to have become the latest victim of this opacity.
