The duty-free tractor import scheme announced in budget 2005-06 is heading towards its logical end as two of the companies, who were granted 2,500 tractors quota each, have approached the government for refund of their bank guarantees.
The Industries and Production Ministry had allowed three parties - the Dewan Automotive Engineering Limited, the Universal Tractors Pakistan (Pvt) Limited, and the Agro Tractors Limited - to import 7,500 tractors, out of total of 10,000 tractors under the approved scheme against million of rupees as revolving bank guarantee.
However, a two-member bench of Sindh High Court (SHC) comprising Justice Muhammad Mujibullah Siddiqui and Justice Syed Zawar Hussain Jafari quashed the scheme on two constitutional petitions filed by the Shahzad Riaz Trade Links and the Fecto Belarus Tractors Limited.
The affected parties filed appeals in Supreme Court of Pakistan against the decision of the Sindh High Court, which is being heard by the apex court.
Meanwhile, the federal government announced another duty-free tractor scheme in the federal budget on June 5, providing a level playing field to all the parties who are interested in import.
Keeping in view the changing scenario, two companies - the Universal Tractors Pakistan Limited and the Dewan Automotive Engineering Limited - have approached the federal government for refund of their bank guarantees.
However, the federal government is of the view that bank guarantees would not be refunded to the parties till the final decision of the Supreme Court.
The court observed that it was not known as to how the import in CKD was included in the facility and no decision of the ECC has been produced before the court to show that the facility was also meant for the CKD.
The court had also struck down the exemption notification issued by the CBR to the extent of import in CKD condition being beyond the purview of the ECC decision, while the exemption to import by the approved parties in CBU condition would remain intact, but fresh notification should be issued after the new allocations.
"The existing notifications are not to be acted upon," the court said.
At the conclusion of arguments, Mehmood. A. Shaikh, the counsel for the Agro Tractors Limited, contended that his client had already imported 156 tractors, which are not in CBU condition, and his client had to bear heavy demurrages, praying that the party should be allowed to get the tractors released on zero tariff.
The court observed: "We are not inclined to allow this relief because we have held that the exemption granted by the CBR to import in CKD condition is beyond the purview of the ECC decision, and we have struck down the exemption notification to that extent. The party should get released imported tractors on payment of normal duties and taxes."
The sources said the companies were worried since the government had opened import of tractors for all the aspirants, why they should stuck their amount on the name of bank guarantees.
But, local tractor manufacturers were exerting pressure on the government for reversal of duty-free tractor import scheme, however, any decision in this regard would take a long time, the sources added.