The country's auto sector is still feeling sore at the "unfair" auto policy approved by the Economic Co-ordination Committee (ECC) of the Cabinet after setting aside the understanding reached between the industry and Chairman Privatisation Commission (PC), Muhammad Zubair.
The auto parts manufacturers are arriving in Islamabad on Tuesday (tomorrow) in an effort to hold meetings with Finance Minister, Ishaq Dar, Commerce Minister, Engineer Khurram Dastgir Khan, Minister for Planning and Development, Ahsan Iqbal, Prime Minister Advisor on Revenue Haroon Akhtar Khan, Chairman Board of Investment (BoI), Dr Miftah Ismail, Prime Minister's Secretary, Fawad Hasan Fawad Chairman FBR, Secretary Industries and Production, Khizar Hayat Gondal.
According to manufacturers, during the last 18 months, the auto industry has been the principal driving force behind growth in Large Scale Manufacturing (LSM). Also, being 100 per cent documented in its transactions, the auto sector has become one of the biggest tax contributors to FBR.
"To our dismay, auto industry is not on the priority list of the government. We request the key decision makers in Islamabad to engage with the industry to remove serious impediments retarding auto sector's growth and contribution to the economy and unlocking the potential of this sector," argues a letter written by Chairman PAAPAM to at least eight top decision makers.
PAAPAM argues that auto policies in high growth economies (China, India, Indonesia, Thailand etc) are used as a tool to stimulate economic growth by providing incentives for local production of auto parts. However, the current ADP does not address this objective and the industry has highlighted the following reservations:
SEZ incentives to Foreign or Local Auto Parts Manufacturers on setting up new Greenfield plant for production of a component not produced before in Pakistan-- This incentive was committed by EDB to PAAPAM during two years of ADP consultations. This measure has the potential to provide huge impetus for local production of new components for engine, transmission etc in the country and would have contributed towards luring capital investments from global as well as local APMs. Unfortunately, without any prior discussion with PAAPAM, this incentive was dropped from the ADP draft at the last moment, making the APMs feel abandoned by the government.
Increase in duty on import of Sub-Components from 5 percent to 10 percent- Under the principle of cascading duties, APMs are allowed to import sub-components, being semi-finished parts such as forgings, castings etc, under SRO 655 at 5% rate of duty. The purpose of this tariff was to enable APMs investment in processing equipment for value addition of sub-component into finished component. Under the ADP, the duty on import sub-component has been increased to 10% and equated with duty applicable on "components". Apparently, this has been done on the pretext of avoiding misuse. PAAPAM believes that misuse, if any, should be controlled by improving the administrative capabilities of EDB and FBR, rather than by taking away an incentive that creates employment opportunities for thousands of Pakistanis
Regulatory duty on imports of auto steel materials-- FBR has been imposing Regulatory Duties on steel grades used in auto sector that are not even manufactured in Pakistan. Imposition of these duties from time to time severely damages the well designed and delicate cascading duty structure of imports laid down in the approved ADP. PAAPAM believes that such interventions affect the sanctity of ADP and should be avoided at all cost.
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