Engineering Development Board (EDB) is reportedly giving final touches to the new entrant auto policy which is expected to be submitted before the Economic Co-ordination Committee of the Cabinet shortly, sources in Ministry of Industries and Production (MoI&P) told Business Recorder.
The new entrants policy, as informed by sources, will be giving preference to new investors especially a Karachi-based company, over the existing Original Equipment Manufactures (OEMs) "EDB had been tasked by the ECC to consult the stakeholders including existing OEMs which we have completed," the sources added. The sources said, at a recent meeting in Islamabad, EDB officials urged the OEMs to follow Auto Industry Development Plan (AIDP) in letter and spirit but at the same time they changed the incentives already available in the new entrants Policy.
According to new proposed entrant policy, the EDB maintains that the condition of 500,000 cars or 100,000 cars should be abolished to encourage fresh investment in auto sector and keep pressure on existing OEMs. The new entrants will be allowed to purchase 20 per cent local parts during the first year of their operation, followed by 35 per cent in the second and 50 per cent in the third year. However, the government will seek some guarantees from the new entrants so that they do not wind up their business whenever they want and leave the country.
The under AIDP has been defined as a potential assembler / manufacturer of global significance who had no assembly / manufacturing of similar vehicles in Pakistan in the past and intends to assemble / manufacture a vehicle by himself or through an agreement with a Pakistani company.
The following conditionalities are also part of the existing policy. Present eligibility criteria- in case of cars, the potential new entrant will have 500,000 units annual production in countries other than Pakistan. The new entrant will have significant global presence by way of manufacturing at least 25,000 units of trucks and buses separately, 40,000 LCVs and at least 50,000 units in the case of agriculture tractors annually in countries other than Pakistan. New entrant will have the plan for the progressive manufacturing of vehicles. New entrant will have serious and demonstrable intention to develop parts locally either in-house or through the vendors to achieve competitiveness.
Registration is required to produce road worthy vehicles that comply with environment standards with the EDB and MoI&P for entitlement of benefits under the scheme.
The new entrants will have to submit a proof of land acquisition in the case of green held project or an agreement with the owner, in the case of existing assembly facilities.
A qualifying new entrant will be required to submit a detailed business plan to EDB who will verify the complete in-house assembly/manufacturing facilities etc. AIDC will assess the business plan and other relevant documents to determine the eligibility criterion and to qualify the potential new entrant for the entitlement of benefits under AIIP or otherwise.
Analysts question as to who will invest in Pakistan auto sector when the existing OEMs are being treated likes enemies of the country. They also lament EDB and MO&IP's constant accusations of high prices of local cars but maintain that the ministries are simply not going through data which shows that prices of cars have increased only 5-8 per cent mainly due to change in models. EDB argues that the car manufacturers have not followed the AIDP vision of indigenization of alternator, starter motor, water pump, fuel pump, fuel filter, seat recliner, air cleaner assembly, power steering, engines and transmissions.