The federal government has given go ahead to briefcase assemblers to enter in the domestic auto sector by notifying new entrant policy on Friday. Auto manufacturers strongly criticised the Ministry of Industry and Production (MoIP) decision by terming it ‘anti-industry’.
The MoIP notification states, “A potential new entrant having a global presence of 100,000 units per year production in case of cars, 25,000 units per annum in case of trucks and buses separately and at least 50,000 units in case of agriculture tractors shall be entitled to import 100 per cent complete knock-down (CKD) kits, whether or not locally manufactured, at the leviable Customs Duty, for a period of three years from start of assembly or manufacturing.”
The policy will come into force from November 13, after formal approval from the Economic Coordination Committee (ECC) of the Cabinet. Although the MoIP has imposed some conditions on new entrant but local manufacturers believe that the new entrant policy will badly hurt the local car manufacturers.
Speaking to Profit, Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM) Chairman Syed Nabeel Hashmi said that PAAPAM always supported the entry of new entrants in the country. He underlined that as the industry was still trying to establish itself and local auto-parts manufacturers believed in fair competition the government policy was unjustified.
He pointed out that for heavy vehicles – buses and trucks – local industry was already running under extreme pressures due to low demand hence the new entrants might not be viable but rather damage the existing manufacturing in the country.
Similarly, he also indicated, the local industry had already achieved 90 per cent localisation in agriculture tractor manufacturing. There were enough tractor parts manufacturing facilities available in the country. “The CKD import relaxation should not take place at the cost of domestic industry”, he underscored and added that briefcase assemblers could neither promote fair competition nor could help the country in generating more jobs or enhancing exports.
He urged the government to re-visit its decision to avoid misuse of 100 per cent import facility that would play havoc with the industry. Further allowance towards contract assembly on existing manufacturing facilities needed to be withdrawn and intentions to develop parts locally be made verifiable only through issuance of purchase orders to recognised PAAPAM certified auto-parts makers.
On the other hand, automobile manufacturers point out that the government has created an anomaly by introducing two different tax regimes for auto manufacturers. They indicate that under the new policy SRO 693 will not apply on new entrants and will give free hand to new entrants to import CKD car kits at 32.5 per cent Customs Duty and light commercial vehicles (LCV) at 20 per cent Customs Duty.
They said that local manufacturers had made billions of rupees investment in the country, but the new policy was bound to kick them out. They point out the government had formulated the Auto Industry Development Policy in consultation with stakeholders in 2006 that aimed to increase auto manufacturing base in the country. Seven auto manufacturers were operating in the country that made billions of rupees investment. But owing to inconsistent government policies four units had already been closed and the rest would be weeded out by the new policy.
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