New entrants must chalk out plan for progressive manufacturing of vehicles

Although the government has notified incentives for new entrants in automobile sector, to safeguard against non-serious players brief case assemblers, it has been made imperative for the new entrants that they shall chalk out a plan for progressive manufacturing of vehicles spreading over a maximum period of three years.
Within this period they shall catch up with the localisation or indigenisation level of respective vehicles, as approved by Auto Industry Development Committee (AIDC) of the Engineering Development Board (EDB); and continued non-levy of additional customs duty shall be contingent upon the achievement of progressive annual indigenisation as determined by the committee.
The incentives have been notified under the Auto Industry Development Programme (AIDP) and an amended SRO issued recently by the Federal Board of Revenue (FBR) says that additional customs-duty leviable under the earlier SRO issued in 2006 shall not be charged on sub-components, imported in any kit form by an assembler or manufacturer declared to be a new entrant by the EDB, for a period of three years from the start of assembly or manufacturing of respective vehicles, subject to certain conditions.
Earlier, in another notification issued by the Ministry of Industries entitled 'Auto Industry Investment Policy' (AIIP) of the AIDP, it was said that potential entrants with a global presence of 100,000 units per year production in case of cars, 25,000 trucks and buses separately, and 5,000 agriculture tractors shall be entitled to import 100 percent CKD kits, whether or not locally manufactured, at the leviable customs duty for a period of three years for the start of assembly or manufacturing. The notification is valid from the date of approval of AIIP of ADIP by the Economic Co-ordination Committee (ECC) of the Cabinet through a decision taken in 2007.
The government has sent the following conditions for new entrants:
---- Have a plan for the progressive manufacturing for vehicles.
---- Have serious and demonstrable intention to develop parts locally.
---- Clearly identify the destinations in its plan or in agreement with its partners for export of vehicles and parts manufactured in Pakistan.
---- Produce road worthy vehicles complying to environment standards, with the EDB and Ministry of Industries.
---- Have proof of land acquisition in the case of green field project or an agreement with the owner, in the case of existing assembly facilities.
---- Be required to submit a detailed business plan to the EDB, which shall verify the complete in-house assembly or manufacturing facilities, and
---- AIDC constituted vide Ministry of Industries, Production and Special Initiatives Notification No 2-4/2006/Tech-1 of December 18, 2007, shall 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.
The AIIP (ADIC) clause 9.2 of the AIDP investment chapter 9, the clause 9.3 automatically will come into force as per AIDP and this is being vetted by the Ministry of Law.
The EDB while approving the list of new entrants will make the CD application for Pakistan Revenue Automation Limited (Pral). The clause 9.3 states that "new entrants will be allowed to import 100 percent CKD kit, at the leviable customs duty for a period of three years from the start of assembly/manufacturing".
Under clause 9.3 of AIDP, there will be two regimes in the absence of SRO 693, ie (i) existing OEMs on which SRO 693 and Customs General Order (CGO) 11 & 12 are applicable and (ii) new entrants which import all the CKD on the basis of SROs 655 & 656.