The Economic Co-ordination Committee (ECC) of the Cabinet is reportedly considering to reopen on Tuesday import of five-year-old used cars, which may raise serious concerns in Japan, sources told Business Recorder. Analysts point out that the Japanese government has considerable leverage as it extends millions of dollars of assistance to Pakistan annually for social development.
"The ECC members are furious at the Finance Minister for advising the Commerce Ministry to withhold Statutory Regulatory Order (SRO) regarding increase in the age of imported used cars from 3 years to 5 years on the instructions of Prime Minister Yousaf Raza Glani," sources close to Secretary, Industries and Production (MoI&P), Abdual Ghaffar Soomro, told Business Recorder.
Prime Minister's Advisor on Social Sector, Shahnaz Wazir Ali, was at the head of those ECC members who advised Finance Minister Abdul Hafeez Shaikh, who is also chairman of the ECC, to consult Prime Minister prior to taking decisions on such risky issues.
"This decision was taken after detailed deliberations spanning over six months. Therefore, decision taken by the ECC should not have been withheld," sources quoted Shahnaz as saying in the meeting on January 13, 2011.
Prime Minister's recently transferred Principal Secretary, Nargis Sethi, (referred by the Prime Minister as Condi) had written a letter to the Finance Minister, urging him to immediately halt import of used cars as, according to the Prime Minister, this decision is harmful for the local auto industry.
According to official documents, it was pointed out during the meeting that to implement this decision, the Ministry of Commerce (MoC) had issued an SRO on December 8, 2010. Meanwhile, Prime Minister's Secretariat intimated that the Prime Minister was pleased to desire to review the matter and to withhold the implementation in respect of ECC's decision regarding increase in the age limit of the used cars.
It was further stated that the Ministry of Commerce had made a reference to the Chairman of ECC on December 28, 2010. However, they are of the view that in terms of Rule 16(2) of Rules of Business 1973, the Prime Minister may give directions without reference to the Cabinet. On the basis of Prime Minister's directive, the Ministry of Commerce also issued an SRO on December 30, 2010.
After arguments and counter-arguments, the ECC directed the Commerce Ministry to review the matter on rationalising the prices of locally manufactured cars quickly and bring the summary in the next ECC meeting.
Following the directives of the ECC, the Commerce Ministry has submitted a fresh summary to the ECC, proposing increase in age limit from three years to five years for import of used cars and other vehicles.
Sources said that the Ministry of Commerce, the Ministry of Industries and Production (MoI&P) and Federal Board of Revenue (FBR) argue that the proposed change in the age limit of cars and other vehicles (trucks, buses, motorcycles and tractors) from existing 3 years to 5 years would be an effective tool to reduce the prices of locally manufactured cars, without adversely affecting the local assemblers for the reason that landed cost of cars aged 4 years to 5 years is not substantially lower than the price of locally made new cars of equal capacity.
"This argument is also substantiated by the fact that when transfer of residence and personal baggage schemes were relaxed by the Commerce Ministry in 2005-06, maximum number of secondhand/ used cars were imported, but there was no negative impact on the local industry which had touched highest production volume of over 170,000 units that year," sources quoted MoI&P is saying in its comments on the summary of MoC.
Industries Ministry, sources said, reiterates that extending the age limit of secondhand/ used cars and other vehicles under transfer of residence, personal baggage and gift schemes is the most preferred option.