ISLAMABAD: The National Assembly Standing Committee on Industries and Production worked out a five-year new tariff regime for auto sector, presumably to bringing down rates imported and locally assembled cars, without taking Federal Board of Revenue (FBR) on board.
Presided over by PTI lawmaker Asad Umar, the committee also recommended reduction in GST on tractors from 16 to 10 percent with a view to helping the local tractor industry flourish and benefit the farmers.
The team of a headless Engineering Development Board (EDB) present in the National Assembly Standing Committee did not argue against or in favour of the tariff structure recommended by the members. The committee recommended that duty on localised parts be slashed from 50 percent to 30 percent and then to 20 percent. The committee underscored the need for redefining rates of duties on components, subcomponents and sub-assemblies that are presently subjected to 5 per cent, 10 percent and 20 percent, respectively, to 5 percent, 7.5 percent and 10 percent, respectively. The committee also recommended tariff for CKD components at 20 percent from prevalent 32.5 percent as the committee did not agree with 25 percent rate proposed by the sub-committee and strongly recommended a further reduction to help encourage local manufacturing and bring cost of locally produced cars down.
On CBU, the committee recommended reduction in duty on 1800 CC and above cars from 150 percent to 100 percent, on 1600 CC and above from 75 percent to 50 percent and up to 1600 CC from 50-55 percent to 35 and 30 percent in five years. The committee expressed annoyance at the EDB for granting licenses to those companies that do not have assembling plants.
Briefing the committee, Federal Industries Joint Secretary Arif Ibrahim stated that the Ministry conceptually agreed to the new five-year tariff structure, cautioning that such a move will have a negative impact on revenue. With regard to quality of cars being assembled in Pakistan, he named a mode being assembled in the country which, according to him, should be a banned model. Asad Umar argued that if the government brings down tariff, it will certainly enhance the volume of sale of cars.
On the occasion, EDB representative Ajmal Sharif assured the Standing Committee that amendments were being proposed to impose a ban on licences to such companies. For such companies Nabeel Hashmi, a senior member of PAPAAM, uses the term “briefcase assemblers”. The EDB representatives also failed to convince the committee as to why tariff was lower for the new entrants.
Ajmal Sharif maintained that no new investor could compete with the existing OEMs which was why new entrants had been offered tariff incentives aimed at attracting new investment in the country. The committee chairman seconded the viewpoint of EDB, saying that protection to existing OEMs’ was so heavily shielded that new players were reluctant to enter to come Pakistan’s auto sector.
Prominent businessman and MNA from Chiniot, Qaisar Ahmad Sheikh also opposed a 150 percent duty on a import of cars, saying that only a few OEMs were benefiting from the prevalent tariff structure. EDB representative Ijaz Khan informed the committee that the CUB duty rate in India was 100 percent whereas on CKD duty was 10 percent. He argued that most of the vendors in Pakistan are non-competitive while a few vendors are real exporters.
A sub-committee headed by Alhaj Shah Jee Gul Afridi, owner of M/s Faw Motors and Mian Abdul Manan, prepared the following policy for the existing and new auto sector players. The sub-committee argued that new entrant policy was beneficial to attract new investment in Pakistan. It has created an environment of healthy competition as well among the OEMs.
Sub-committee has recommended that incentives are required to be extended to auto parts industry as well as for undertaking indigenization of high tech parts. EDB, in its comments stated that in new automotive development policy, a provision of technology support has been proposed for technology up-gradation of vendors.
