Automotive Development Policy: PAMA concerned over alleged extension in incentives to new entrants

ISLAMABAD: Pakistan Automotive Manufacturers Association (PAMA) has raised concern over alleged extension in incentives available to the new entrants under the Automotive Development Policy (ADP) 2016-21.

In a letter to Engineer Asim Ayaz, acting general manager (policy) Engineering Development Board (EDB), the Director General PAMA, Abdul Waheed Khan, has sought clarification with reference to the cut-off dates mentioned in the minutes: (i) the maximum incentive period is five years, in case of greenfield, and three years in case of Brownfield, thus, for those approved companies, which will start their commercial operations after June 30, 2021, the break-off dates (counted from the end date of the ADP i.e. June 30, 2021) shall be June 30, 2026 and June 30, 2024 respectively. The companies who have already started their commercial production before June 30, 2021, their incentive shall not go beyond their approved five-year business plan; (ii) those companies who have already started their commercial production before June 30, 2021, shall not be allowed to modify their business plan, unless it is covered in their agreement, without proper justification. As it may result in withdrawal of incentive as per clause 4.4 of the ADP 2016-21.

The clause 4.4 of the ADP 2016-21- withdrawal of incentive, says that in case of material deviation from the approved commercial operation schedule, withdrawal of incentives shall take effect….

In this regard, the new entrants, already in production, shall be entitled to avail concession for five or three years, as the case may be, counted from the date of commercial production.

However, these new entrants, also, reportedly, submitting revised business plans for the new models.

This, submission of revised business plan, by those who have already attained commercial production, may circumvent the incentive period that may end up being more than five or three years.

The PAMA has requested the EDB to clarify the position that there is done deal once in commercial production, yet the submission of revised business plan may revive incentives that may; therefore, exceed the prescribed periods stated above.

In this regard, the Association has drawn the attention to the last line at page 10 of the minutes that say, In that case New Entrants can respond/submit application finalize plans by April 30, 2021. Perhaps the New Entrants referred here are those who have not yet finalized their plans and have not yet in commercial production?

The EDB has further been requested to give a detailed briefing in the next AIDC meeting on the extent of incentives available to greenfield investors under the light of AIDP 2016-21 and relevant SROs and notifications, as the PAMA seek clarification on the following points as well: (i) from which date the period of five-year incentive starts and when it ends; (ii) what is the duration of business plan, can it go beyond five-year period; (iii) under what circumstances approved business plan of the new investor is allowed to be modified and to what extent. Is the OEM who already submitted plan, can resubmit or allowed to change their plan; (iv) is there any official document defining the cut-off date of June 30, 2026 and; (v) what are the terms and conditions of agreement signed with the new entrants.

There is no mention about hybrid vehicles which should also be part of the new policy.

Copyright Business Recorder, 2021