Auto Industry Development Committee (AIDC) is all set to hold a stormy meeting on Friday (today) after accusations of alteration in minutes of the body's 24th meeting held last month, well-informed sources told Business Recorder. The main agenda of the AIDC is to approve tariff concession for localized parts of SUVs 1000cc to 1500cc and 1501cc to 1800cc to be covered under SRO 693(I)/2006.
M/s Honda Atlas Cars (Pakistan) Limited applied for EDB's approval for their new Sport Utility Vehicles (SUVs, 2x4) 1500cc, in petrol version. The Inter-Departmental Technical Committee (IDTC) in its 56th meeting approved the creation of new PCT heading under 1000cc to 1500cc category and 1500cc to 1800cc category for SUVs. The same has been referred to FBR for creation of the said PCTs. The proposal was given considering prospective new entrants under ADP in these categories of SUVs as well. In case of M/s Honda Atlas Cars, FBR has requested submission of localized parts to be covered under SRO 693(I)/2006 of their SUV for incorporating during current budget.
EDB has already granted provisional approval considering existing localized parts of SUV (4x4) category however localized parts of the above SUV of M/s Honda Atlas Cars need to be determined. Pakistan Automotive Manufacturers Association (PAMA), and Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), two representative bodies of auto sector, have taken on the EDB for altering the decision of the AIDC held on April 13, 2017.
PAMA, in its letter to the CEO EDB has stated that as soon as the minutes arrived, the Association received a response from one of its esteemed members, Dewan Farooq Motors (DFML), with regard to the agenda item number 4, about which they were invited to the AIDC. A six-member DFML delegation, including a representative of their joint venture partner, attended the AIDC, appearing at the serial number 46 to 51 of the attendance sheet.
The DFML response highlighted an obvious inconsistency with respect to contents of the minutes that the recorded 'decision' was not consistent with what was actually briefed, discussed and recommended; mercifully, all that is available at the best part of the minutes, agenda item no 4, which is reproduced as follows "the committee was briefed regarding the application of M/s Daehan Dewan Motor Company (Pvt) Ltd, received through BoI for revival of manufacturing plant of M/S DEWAN FAROOQUE MOTORS LIMITED (DFML), under Brownfield Investment category of Automotive Development Policy (2016-21) for the production of Shehzore (LCV) and Ssangyoung (SUVs) vehicles. Further, the plant was closed down since 2010.
"The committee was also briefed about reasons for operations of M/s DFML beyond the cutoff date ie July 1st 2013 which was given special approval by Auto Industry Development Committee (AIDC) (16th meeting) to consume their leftover inventory during September 2013 to February 2014. During the said time period, M/s DFML did not import any kit. Shariq Suhail informed that continuation of the plant also helped the vendors who were in crisis as well at that time. M/s Indus representative also appreciated the fact that M/s Dewan despite the crisis maintained the plant and supported the employees during the period of closure ie 2010 to 2016. This served the national interest. They supported revival of the unit. Representative of M/s Tayyaba Motors while endorsing the point of view informed that the unit is located in the remotest areas of Sindh, they need to be morally and ethically supported. While other OEMs and participants also unanimously agreed that M/s Dewan Motors need to be duly facilitated and that the plant was shut down in 2010 and temporary operations may not be termed as plant being operational in view of no CKD imports and the agreement with Principal was also not revived. Their case may be processed without change in policy. FBR point of view was that whether the plant was closed or operational is to be decided by the EDB, they do not support any change in policy since it is mentioned in the policy that it can only be reviewed after two years while it is only in its first year of implementation".
The EDB officials involved in the process of framing the policy were of the view that the Brownfield Investment category was proposed to facilitate revival of closed down units and M/s DFML was the largest among such units. The decision communicated by the EDB stated that keeping in view the spirit of the existing policy for revival of closed down units, the AIDC unanimously supported the case of M/s Dewaan Farooque Motors for suitable amendments in the ADP 16-21 for availing benefits under the Brownfield Category.
"Unanimously supported the case of DFML for suitable amendment in the ADP 16-21" so says the impugned decision; whereas, no amendment [change] in the policy was recommended by the AIDC. This was an obvious and blatant inconsistency; to say the least. Such a glaring departure form a unanimous recommendation by the AIDC may not be just an omission.
According to PAMA, the unanimous decision was "their case may be processed without change in the policy" (highlighted green). Further, so far as the DFML's case was concerned, a policy change was not warranted, simply for the reason that their post July 2013 operation was unanimously interpreted by the AIDC as a temporary activity only and not a revival per se: a consideration based on the facts that the plant was shut down in 2010, no further CKD was imported and the temporary operation in question, duly authorised by the EDB, was only to clear up the plant of the parts that were trapped and decaying since 2010. It may be added that DFML's agreement with Korean counterpart had expired in 2010.
"We have clearly brought forth that the AIDC recommendations have not been truly reflected in the impugned decision, as minuted, and request your intervention for removing such a glaring and blatant discrepancy. It has been long that a bona fide case of new investment under the ADP 2016-21 is waiting for a decision and now to be expedited by taking an urgent action," said Abdul Waheed Khan, Director PAMA.
PAMA maintains that PAMA members have pointed out that in order to safeguard the interest of the local industry PAMA should also be taken on board besides PAAPAM for the purpose of FTAs with Thailand and Turkey.
Atlas Honda has clearly stated that it does not favour a change in policy for "New Entrants" in motorcycle. Recounting the ECC's unanimity on this count, it was highlighted by them [Atlas Honda] that current policy was made with due regard to new technology and over capacity in motorcycle sector, therefore, no chance in the policy was warranted. It was the stance of the motorcycle sector that continuity of policy was more important for their industry than correcting any ambiguity at the cost of stable policy environment.
PAAPAM in its letter has stated that during the AIDC meeting held in April 13, 2017, a point as to the status of temporary production of some left over CKDs that were utilised on approval of AIDC in 2013 was discussed. After detailed deliberations, the following points were highlighted: (i) DFML has been shut since 2010 as no CKDs have been imported since then; (ii) left over CKDs were consumed after AIDP's approval to pay off vendors as a special case; (iii) during conception of Brownfield facility, DFML was the major consideration based on its huge investment, loss of business to the vending industry and its potential of uplifting a rural area; (iv) it was also highlighted that a temporary operation of a company shut for more than seven years may not be termed as plant being operational.
According to the PAAPAM, the committee was of the unanimous opinion that revival of DFM under brown field status should be granted. The decision issued in minutes, however, portrays a situation/decision which is different from what was actually finalized. PAAPAM has strongly suggested that the decision in the minutes may be amended and should reflect the decision which was unanimously concluded during the meeting, ie that DFML should be granted Brownfield status on immediate basis.
Accordingly, the following words should be deleted from the decision: " for suitable amendments in the ADP 16-21". The amendment may kindly be approved and minuted in the 25th meeting of AIDC, fixed on May 19, 2017, and thereafter revised minutes of 24th meeting of AIDC held on April 13, 2017 may be issued accordingly.
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