Hectic efforts of the lobby of local motorcycle industry have reportedly blocked incentives to a specific company which is being supported by the Board of Investment, Commerce Ministry and Deputy Chairman of the Planning Commission, sources in EDB told Business Recorder.
This is the crux of a meeting of Economic Co-ordination Committee(ECC) of the Cabinet on August 16, 2012 presided over by Finance Minister, Abdul Hafeez Shaikh. The ECC was informed that in pursuance of its decision of July 3, 2012, the committee headed by the Minister for Information and Broadcasting, Qamar Zaman Kaira, held its meeting on July 17 and finalised recommendations for protection of local motorcycle industry.
These recommendations included(a) general tariff reduction for the existing motorcycle industry ; and (b) policy for the new entrants. During ensuing discussion, the ECC was informed that the proposals made in summary submitted by the Commerce Ministry are meant to decrease protection to the existing motorcycle industry and providing increased protection to the new entrants.
Some of the members were of the view that the proposals are likely to generate criticism from different sectors and as such the ECC should consider all pros and cons before taking a decision. It was stated that the existing auto mobile industry, approved some five years back by the ECC, does not include the motorcycle industry.
The ECC was also informed that the automobile industry policy is under review and now the motorcycle industry would be included in it. According to sources, some of the participants who are supposedly in favour to give special incentives to a specific company argued that the existing motorcycle industry is using old technology which is not used anywhere in the world except in Pakistan and one African state.
These supporters of one specific company further argued that it is imperative to provide incentives to the new entrants with the condition that they would bring in new technology compatible with Euro-II technology. They will manufacture motorcycles of 100 cc and above engine capacity. Such motorcycles will have a huge potential of export to India which has lowered the duty to 5 per cent for Saarc countries as Euro-II technology is compatible to Indian Bharat-II standard. The existing manufacturers of motorcycle will also be eligible for the proposed incentives provided they also induct new technology.
The ECC was informed that the fuel presently being use in these automobiles in Pakistan is not compatible to Euro-II. After heated debate between the pro-local motorcycle and pro one specific company, it wt was felt that there are a number of inter-related issues which need further analysis. As such, it was suggested that a detailed presentation on motorcycle industry should be made to the ECC for an informed decision.
The ECC also constituted a committee comprising Chairman, Board of Investment (convenor), Deputy Chairman, Planning Commission, Secretary, Commerce and Secretary Industries. Three of the members of the committee are already supporting one company for incentives. The proposed presentation will include the following : (i) existing trends of motorcycle production in Pakistan, types/ details of motorcycles being manufactured, details of motorcycle manufacturers, rate of return and profit margins and tariff regime applicable to the motorcycle industry; (ii) policy constraints; (iii) fixed cost issues; (iv) lincencing and / or SRO issues and; (v) perspective of new entrants with regard to optimum incentive package. The committee was authorised to associate manufacturers, importers and vendors of motorcycles to its deliberations.
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