Adhering to AIDP''s vision of indigenisation: EDB takes exception to local manufacturers'' failure

The Engineering Development Board (EDB) has reportedly taken strong exception to the failure of local manufacturers in adhering to the vision of the Auto Industry Development Programme (AIDP) of indigenisation, well informed sources told Business Recorder.
At a recent meeting of auto industry''s stakeholders, the EDB top brass accused them of being responsible for failure of AIDP 2006-07 and urged for indigenisation of high tech parts by 2011-12.
"The car manufacturers have not followed the AIDP vision of indigenisation of alternator, starter motor, water pump, fuel pump, fuel filter, seat recliner, air cleaner assembly, power steering, engines and transmissions," the sources quoted Chairman EDB Aitzaz Niazi as saying in the meeting.
However, the EDB chairman also faced criticism from the OEMs for not supporting the local industry in letter and spirit.
The government replaced the deletion programmes for the automotive sector with the Tariff Based System (TBS) from July 2006 to make auto sector compliant with the Trade Related Investment Measures (TRIMS) under the World Trade Organisation (WTO) regime.
TBS has the following main objectives: (i) preservation and promotion of technologies that have been developed in the country;(ii) protection to the present job structure in the auto sector;(iii) promote job creation;(iv) protect the existing and planned investment by the OEMs and vendors;(v) promote new investment; and (vi) expand the consumer base to create economies of scale.
Incentives and protection available to auto sector under TBS are as follows: cars are enjoying 32.5 per cent concession in duty on non localised parts and 50 per cent localised parts (protection), light commercial vehicles not exceeding 20 per cent concession on non localised parts and 45 per cent on localised parts.
Motorcycles: 15 per cent concession on non-local and 47.5 per cent on localised parts. Auto rickshaw: 20 per cent incentives on non-localised parts and 50 per cent localised. Heavy Commercial Vehicles (HCVs) exceeding five tons: 20 per cent concession on non-localised parts and 50 per cent on localised parts. Buses (non CNG): five per cent incentives on non localised parts and 35 per cent on localised parts. Buses (CNG): zero per cent concession on non-localised and 35 per cent localised parts and similar concession for tractors.
Total investment of vendor industry is Rs82 billion. Investment was made on the targets set in AIDP for producing 500,000 cars by 2012. However, auto industry production declined significantly during last two years.
The sources said that the vendor industry was not operating at full capacity due to reduced demand from OEMs thus affecting their return on investment. However, vendors contention was that OEMs were not allowing corresponding increase in price of components/parts and OEMs had gone into in-house production of parts, the sources maintained.
According to sources, OEMs were importing parts being produced by vendors due to TBS-tariff differential of 17.5 per cent.
The sources said that the EDP top brass had urged car manufacturers to purchase local parts instead of importing to support the local vendor industry.
The government has recently increased the age limit of used cars from three to five years to compel local auto industry from over charging consumers.