KARACHI: The draft of Automotive Development Policy 2014-19 has proposed at least eight measures for consumers’ welfare.
The draft was shared with auto stakeholders on Jan 7, 2015, in a meeting chaired by Privatisation Commission Chairman Mohammad Zubair, and was also attended by relevant officials. Stakeholders were asked to submit their feedback through their respective associations by Jan 20, 2015, as the government would not entertain any individual case. The policy has already suffered delays.
Consumer-related suggestions include phasing out of vehicle models older than 10 years in case of cars and light commercial vehicles and 15 years in case of heavy commercial vehicles by the assemblers.
The draft proposes product recall system in line with global practice and compulsory installation of immobilisers in cars by the assemblers.
Amount of advance payment shall be limited up to 50pc of the total price.
Delivery and price schedule, not exceeding three months, shall be firmed at the time of booking and any delay over three months shall result in discount at the rate of Kibor plus two per cent prevailing on the date of final delivery/settlement from the final payment.
This will help shorten delivery lead time. Another step is enforcement of safety regulations by the Ministry of Communications.
Effort is being made to address conflicting interest of stakeholders. The local industry wants high tariff walls and correct valuation of used cars while local auto part makers seek high tariff walls, correct valuation of imported parts and no import as scrap. Parts importers are looking for low CKD tariff and continuation of parts import by weight while vehicle importers seek reduction in CBU rates and allowing of commercial import of vehicles.
New investors are demanding low CKD tariff, CBU tariff rationalisation, special incentives and policy consistency while consumers’ interest revolve around quality, price, choice and financing.
ADP envisages two categories of investment with different incentives and under category (A) investment, new plant shall not use the facility of existing plant, investment for making additions to existing facilities shall not qualify under this category and finally green field investment by a new or existing investor for vehicles not presently produced in Pakistan. Category-A incentives include import 100pc parts at 10pc rate of customs duty for a period of five years in respect of passenger cars and LCVs.
Under (B) category investment, revival of an existing non-operational or closed unit either independently or under joint venture agreement with foreign principal for production of new vehicles or new investment in existing facilities for production of a new variant not produced before, with new body shell on new platform but does not include incremental changes, improvements or face lift. Under this category, one of the incentives include import 100pc parts at 10pc rate of customs duty for a period of two years from the start of operations in respect of cars and LCVs.
A qualifying new investor shall have a track record and experience in the automobile manufacturing field.
Under used vehicle import policy 2014-2019, import of all types of vehicles shall be regulated. No used vehicle shall be imported except through personal baggage scheme, transfer of residence and gift scheme. No used cars and pick-ups (up to 1.5 tonnes) older than three years shall be imported.
No used LCVs (above 1.5 to five tonnes) heavy commercial vehicles older than five years shall be imported. The policy proposes one per cent depreciation per month to a maximum of 36pc in case of cars and pick-ups.
Duty for imported vehicles shall be paid through banking channel in foreign exchange. FBR shall issue year schedule of import duties in US dollar terms on June 30 of each year, applicable at least for next six months.
At present, localised auto components are a part of SRO 693 and they attract higher duty vis-a-vis non-localised parts.
SRO-693 is a parallel system to customs general order (CGO) which contains a list of all locally manufactured engineering goods, other than auto. This system has created unnecessary duality and problems in implementation.
The ADP proposes gradual reduction of import duty of 50pc on localised parts from first year to 45pc, 40pc and to reach 35pc in the third year and become uniform for all categories of automotive.
As 35pc is also the duty rate of commercial import of auto parts, all parts that would stand localised at the end of 2016 would become part of the CGO and attract the same duty of 35pc.
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