Pakistan’s local auto industry has expressed serious concerns over the government’s proposed tariff rationalisation plan that could put the entire investment in the auto manufacturing and vendor industry in jeopardy. Talking to a select group of reporters, a representative of the local auto industry said that the proposed tariff rationalisation plan seeks to reduce the import tariff for completely built unit (CBU) cars from 50 per cent to 25 per cent that was a cause of serious concern in the local auto industry. At present the CBU of cars are importable on 50 per cent import tariff and completely knockdown (CKD) units on 32.5 per cent import tariff. The local industry was enjoying 17.5 per cent import tariff protection.
The Ministry of Industries has already proposed reduction in the existing import duty of 32.5 per cent on the CKD units for the new investors to 5 per cent in first year, 10 per cent for second year and 20 per cent for third year. This would help the new investors to enhance assembly of 100,000 units per annum. The tariff concessions for new entrants would commence from the date of manufacturing.
He said that the government has also reduced the limit of annual production of 500,000 cars for new entrants to 100,000 units per annum. The government is also considering to further reduce the cap to 50,000 cars per annum. The tariff incentives and change in criteria for new investors would have a negative impact on the local industry. He said that the demand for cars and other vehicles was huge for the next many years to come and the government could easily attract new investment if it consistently implements its own policies. Pakistan’s current car production capacity is 269,000 units per annum while the assemblers only manufactured 121,790 units during financial year 2009-10. The Japanese brands have a market share of 99.6 per cent and their dominance is attributed by the Ministry of Industries as the main reason for lack of competition and higher prices of cars in the country.
When asked whether the government has shared the tariff rationalisation plan with them, he said that it was not shared with the local industry. He said that the allowing of import of used cars was not viable as the parity between the Pak Rupee and Japanese Yen has changed. One Japanese Yen was equivalent to Rs0.50 last year and at present it was Rs1.30. The prices of used vehicles have increased by 60 to 70 per cent during recent months. This has even put pressure on the local assemblers to increase prices but they have withheld it as consumers have limits. For eliminating the commission on the purchase of new cars, he said that they have proposed to the government to impose a transfer tax on the vehicles transferred in the first 6 months after purchase. He said the amount of the tax was not important as the book should show that the car was transferred to the second owner that would significantly reduce price of transferred cars. That will discourage the investors to make quick bucks through commission. He said that the government had asked the local auto makers to implement Euro II standards from July 2012. However, he said that the performance of vehicles was dependent on fuel quality, especially diesel which remains below international standards. The government has been forcing local refineries to reduce sulphur content in the fuel but due to circular debt and incentive issues the refineries remain slow in achieving the target.
Auto industry concerned about tariff rationalisation
