ISLAMABAD, Dec 24: The government will evolve a long-term policy for auto parts industry to help increase its exports in international market.

Official sources told Dawn on Monday that a detailed study will be conducted to identify issues and on completion it will be placed before the Federal Cabinet for approval.

The study will address issues concerning quality development, standards, domestic and international market potential, employment potential, and a mechanism for successfully tapping full potentials of the industry.

The auto parts industry is $125 billion, dominated by industrialized countries. The share of Pakistan in total exports is only $25 million. Auto parts consumption is huge but local production is mere 12 per cent of total sales.

The auto parts vendors are also showing steady growth and becoming one of the most dynamic sectors in Pakistan’s manufacturing sector.

The industry generated 110,000 jobs, exported $25.03 million and saved foreign exchange worth Rs23 billion. As production of automotive is increasing in Pakistan, the auto parts vendor industry too is expanding. Production of components of Completely-Knocked-Down (CKD) kits range between 55-70 per cent. The policy of job localization needs to be effectively pursued.

The government has been informed by planners of growth and employment potentials existing due to its backward and forward linkages. Exports of auto sector are over $600 billion while Pakistan’s share is approximately $50 million. Domestic market is expanding with rising income levels and auto financing facility extended by banks.

Since 2000-01, there has been a rising trend in capacity utilization and the industry at present is operating at full capacity. The sector employs about 300,000 workers and that is expected to rise sharply due to a positive outlook of the industry.

Similarly, motorcycle industry is growing steadily. It has greater linkages with the vendor industry that shows its potential for growth. This sector contributes $200 million in the GDP and provides employment to more than 100,000 workers.

Pakistan being an agricultural country has a huge market for tractors. The total capacity of the industry is 45,000 tractors per year but only 78 per cent is utilized as its density is low i.e., one per 98 hectares as compared to one per 83 hectares in India. It is believed that one tractor (50 hp) is required for 30-35 hectares of land for optimum farm performance. The sector contributes $200 million in the GDP and provides employment to more than 50,000 workers.

The industry is developed on old techniques and produces low-value-added products of inferior quality. There is no product and market diversification; the industry largely caters to the needs of limited markets of the West.