The government should declare auto parts manufacturing and assembling as strategic and vital industry and maintain a balance in CBU rate of duty to be high enough to provide adequate protection against import but low enough so that the assemblers are incentivised to indigenise all cost-effective parts irrespective of deletion programme.
Duty on CKD should be reduced from 35 percent to 20 percent so that the savings could be passed on to the consumers thereby bringing car prices down by Rs 50,000 to Rs 100,000.
This reduction in price will increase the market size by at least 50 percent and hence, the loss in duty will be less than compensated by enhanced sales tax.
Feroz Khan, CEO, Adam Motor Co Ltd, recommended these measures while giving a presentation on 'Engineering Vision of Pakistan' with special reference to automobile industry organised by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday.
He said that it was important to note that the CBU rate of duties had been kept extremely high from 100 percent to 350 percent all through 2002 whereas import duty on CKD had been at 35-50 percent.
Only recently, in the last two years, the CBU rates were brought down to 75 percent to 150 percent, while import duty on CKD had been retained at 35 percent.
Thus, in the entire period of the 56 years, the assembling had been heavily protected. This protection had been granted to the assembling industry in return for the commitment to indigenise to 75 percent level in 5 years from the inception of each product.
However, the car assembling industry has yet to fulfil that promise, he added.
He said that the basic philosophy behind developing the assembling industry was to promote auto parts manufacturing which has always been considered a strategic and vital industry universally.
He said that in majority of the developed countries automobile parts manufacturers play an important role in the economic and technological development.
He also highlighted the contribution of this industry in the economy and said that this industry was giving a tremendous contribution to national exchequer. Being in the organised sector, it is an honest tax payer, great job provider, excellent import substitution and having excellent potential for enhancing future exports.
However, he conceded that for some reason the automobile manufacturing industry had acquired a very negative image, and suggested a vigorous media campaign to change this perception from negative to totally positive.
Earlier, President of FPCCI, Riaz Ahmed Tata, introduced the presenter.
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