Automotive Development Policy: government, car assemblers yet to reach agreement

Federal government and local car assemblers are reportedly miles away from reaching an agreement on the much-awaited five-year Automotive Development Policy (ADP 2014-2019) tailored by the Engineering Development Board (EDB) in isolation, well informed sources in Privatisation Commission told Business Recorder.
Chairman Privatisation Commission Muhammad Zubair is now dealing with the auto sector because Minister for Water and Power, Khawaja Asif, convenor of the committee, is unavailable for such meetings due to other official engagements. Sources said EDB, which is the architect of the policy, did not share its draft with the industry which protested to the Finance Minister, Senator Ishaq Dar and Chairman Privatisation Commission after which a couple of meetings were convened to discuss the draft with the industry. Dar last week assured Japan that new auto policy will be approved by the ECC very soon.
The federal government recently heard the viewpoint of stakeholders on the strategic interventions tailored by the EDB. The proposed strategic interventions are as follows: (i) lower entry threshold for new investment; (ii) creation of enabling tariff structure for development; (iii) rationalisation of automobiles import policy; (iii) provision of regulatory and enforcement mechanism for quality, safety and environmental standards; (iv) creation of R&D design and testing infrastructure; (v) development of human resource and training infrastructure; (vi) introduction of technology acquisition support scheme; and (vii) to ensure consumer welfare.
According to the draft ADP, category investors will be allowed to import 100 per cent parts at 10 per cent rate of customs duty for a period of five years in respect of passenger cars and LCVs. They will also be allowed to import 100 per cent parts at prevailing customs duty applicable to non-localised parts for a period of five years in respect of buses, trucks, tractors and prime movers and progressive manufacturing of 25 per cent every year starting from year two based on indigenization level of industry.
Category-B investors will be offered the following incentives: (i) import 100 percent parts at 10 per cent rate of customs duty for a period of two years from the start of operation in respect of passenger cars and LCVs; (ii) import 100 percent parts at prevailing customs duty applicable to non localised parts for a period of two years from the start of operations in respect of buses, trucks, tractors and prime movers; and (iii) 100 per cent exemption from customs duties on import of tooling such as dyes, molds, jigs and fixtures for production, inspection and testing of vehicles to the extent of new variants only, not produced before on one-time basis.
Federal Board of Revenue (FBR) and Competition Commission of Pakistan (CCP) are supporting the increase in age of used imported cars from three to five years aimed at twisting muscles of existing OEMs for allegedly fleecing consumers through ''own money''. Indus Motor Company (IMC) clarified investors and dealers might be involved in this menace.
According to new draft auto policy, no used cars and other vehicles will be imported except through personal baggage scheme, transfer of residence scheme and gift scheme. No used cars, pickups (up to 1.5 tons), older than three years will be imported in to Pakistan.
It has also been proposed that duty for imported vehicles will be paid through banking channels in foreign exchange. FBR will issue the yearly schedule of import duties in dollar terms on 30th June of each year applicable for at least next six months. No relaxation regarding age and applicable duty will be granted under any circumstances. The sources said the government and private sector are supporting different proposals and no consensus has yet evolved on the new auto policy. Private sector, sources said, was asked to bring its proposals in writing to a meeting to be held shortly.