Local auto industry has portrayed the new five-year auto policy 2016-21 as "devastating". Industry sources told Business Recorder that the representatives of Japanese auto assemblers held a detailed meeting on Saturday in Karachi to discuss negative impact of new auto development policy and to prepare future strategy.
"We feel that the new auto policy is a disaster for the existing Original Equipment Manufacturers (OEMs) which have already offered investment worth billions of rupees for the development of auto sector," said one of the representatives of a local assembler.
At least two key government policymakers ie Chairman Privatisation Board Muhammad Zubair who was also the Deputy Chairman of the auto policy committee briefly attended the meeting while Minister for Industries and Production Ghulam Murtaza Jatoi prefer to remain absent from the committee meeting.
According to sources, Muhammad Zubair negotiated with the local industry but his viewpoint has not been honoured by the committee Chairman Khawaja Asif. Zubair has also walked out from a consultative meeting presided over by Khawaja Asif. The furious Zubair was heard as saying that this country cannot progress.
According to the Board of Investment (BoI) a new investor under Automotive Development Policy (ADP), establishing maiden assembly facility will invariably need separate treatment and greater incentives in the early years to enable it to introduce its brand, develop a market niche and share, create a distribution, after-sales networks and develop a part-manufacturer base.
ADP envisages two categories of new investment with different incentives Category A: Greenfield investment is defined as the installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of a make, not already being assembled/ manufactured in Pakistan( make is defined as any vehicle of whatever variant produced by the same manufacturer). Category -B: Brownfield investment is defined as revival of an existing assembly and / or manufacturing facilities that is non-operational or closed on or before July 1, 2013 and the make is not in production since that date and that the revival is undertaken either independently by original owners or new investors or under joint venture agreement with foreign principal or by foreign principal independently through purchase of plant.
Category A investors will be entitled to the following incentives;(i) duty free import of plant and machinery for setting up the assembly and / or manufacturing facility on a one-time basis;(ii) import of 100 vehicles of the same variant in CBU form at 50 per cent of the prevailing duty for test marketing after ground breaking of the project;(iii) concessional rate of custom duty @ 10 per cent on non-localised parts and @ 25 per cent on localised parts for a period of five year for the manufacturing of cars& LCVs;(iv) import of all parts ( both localised and non-localised) at prevailing customs duty applicable to non-localised parts for manufacturing of trucks, buses and prime movers for a period of three years;(v) for motorcycle industry, existing policy as approved by the ECC and notified by FBR vide 939(1) 2013 and SRO 940(1) 2013 shall continue .
Category -B investor will be entitled to (a) import of non-localised parts at 10 per cent rate of customs duty and localised parts at 25 per cent duty for a period of three years for the manufacturing of cars and LCVs and ;(ii) import of all parts (both localised and non-localised) parts for manufacturing of trucks, buses and prime movers for a period of three years.
According to the approved policy, BoI will be the single point of contact of the investor with the government. Any new investors will be required to submit a details plan and relevant documents for manufacturing or vehicles to BoI. The board will get it assessed by Engineering Development Board (EDB) which will verify the investor's in-house assembly / manufacturing facilities for the manufacturer or road worthy vehicles. EDB will determine eligibility of the applicant under the defined criteria to be declared as Category A or Category B investor. Ministry of Industries and Production on the recommendation of EDB will approve new investor under the relevant category. AIDC and EDB will review results of the new investors' policy once every two years and will recommend modification, if any.
In case of material deviation from the approved commercial operation schedule, withdrawal of incentives will take effect. EDB will initiate suitable action after necessary verification that may lead to the stoppage.