Motorcycle industry: government likely to extend tariff concessions to new entrants

The government is likely to extend tariff concessions to new entrants in motorcycle industry with new technology and above 100cc segment, well informed sources told Business Recorder.
The decision was taken at a meeting of a ministerial committee headed by Information Minister, Qamar Zaman Kaira held in Commerce Ministry on Tuesday. However, the other members of the committee - Prime Minister''s Advisor on Petroleum Dr Asim Hussain and the Deputy Chairman Planning Commission - did not participate. The committee''s recommendations will be submitted to the Economic Co-ordination Committee of the Cabinet (ECC) in its next meeting.
The sources said, during the visit of President Asif Ali Zardari to Japan, M/s Yamaha expressed interest in bringing new technology to Pakistan for manufacturing motorcycles of 125cc and above. It was suggested that the matter could be further examined holistically by a committee for an informed and viable decision.
Auto sector analysts believe that M/s Yamaha has won their case for which a team was staying in a five-star hotel for the last four months. However, officials in Industries Ministry are of the view that the concession was not company-specific as all new entrants would be accorded the same treatment.
Official documents reveal that Ministry of Commerce on the recommendations of the Tariff Reform Committee (TRC), through its summary on June 11, 2012, proposed various incentives for the motorcycle industry. The proposal was meant to avoid anomalies which would have resulted in serious consequences for the entire local motorcycle industry. The proposal was to be considered by the ECC in its meeting scheduled to be held on June 19, 2012. However, the ECC meeting was postponed. The proposal was opposed by different stakeholders with Ministry of Industries contending that tariff setting was the exclusive domain of the Ministry of Industries while the latter opposed the decision of the TRC which asked the Ministry of Commerce to move a summary to the ECC. Besides, it was against an earlier ECC decision wherein it was clearly stated that tariff policy was the legitimate mandate of the Ministry of Commerce. The FBR had opposed giving special tariff incentives to new entrants.
However, the BoI reiterated that the exact decisions of the TRC as recorded in the minutes, as follows, must be implemented: (i) reduction in duty on CBU/CKD from existing 65% to 35%; and (ii) reduction in duty on CKD for new entrants from 15% to 5% for five years. The Planning Commission reiterated that the decision of the TRC would be implemented.
The recommendations made by the TRC for reduction in duty on CBU/CKD from existing 65% to 35%, if implemented, would result in an anomalous duty structure as the rate of duty of CBU motorcycle at 35 % would become lower than the duty on CKD kits manufactured locally which stands at 47.5 % at present. Regarding the recommendations of TRC for reduction of duty on CKD from 15% to 5% for new entrants, the Ministry of Commerce stated that at present there was no separate tariff for new entrants. According to it, this tariff of 15 % is available only to assemblers on some non-localised parts of CKD. In the light of the comments of various stakeholders, Ministry of Commerce supported the recommendations made by the TRC for approval with certain conditions.
The conditions included that a new eight-digit tariff lines may be created in Pakistan Customs Tariff for all the parts of 125cc motorcycles with a 5% tariff in case of new entrants; and components may also be reduced as recommended by National Tariff Commission(NTC) to protect the minimum cascading needed by the local industry.