ISLAMABAD: Ministry of Commerce (MoC) has reportedly opposed hike in duties on imported vehicles in CBU condition, concessionary financing by banks for cars and import of right hand drive vehicle in SKD and CKD condition, sources close to Commerce Advisor told Business Recorder.
The MoC, in its comments on Auto Industry Development and Export Policy (AIDEP) 2021-26, has also urged the Ministry of Industries and Production (MoI&P) to take measures to encourage the export of Pakistani assembled vehicles.
The Economic Coordination Committee (ECC) of the Cabinet is expected to consider AIDEP in its forthcoming meeting. On December 10, 2021, the ECC was informed that the Technical Advisory Sub-Committee of the ECC deliberated on the case in its meeting hours before the ECC meeting and recommended to defer consideration of the summary.
Commerce Ministry has offered the following observations on the policy documents to be forwarded for further necessary action:
In the section of promotion of new technologies emphasis has been placed on the promotion of EVs, hydrogen fuel cell technology and hybrid vehicles.
Hybrid vehicles, especially with internal combustion engine, no longer fall in the definition of new technology and these are considered as a transitory technology before introduction of EVs and hydrogen fuel cell technology based vehicles.
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Keeping hybrid at par with these new technologies may undermine the early introduction of EVs in the country as many countries have already announced plans to shift to the EVs by the end of this decade due to various benefits in comparison to conventional ICE based vehicles.
The main responsibility for the development of Eco System/Charging Stations for EVs has been assigned to the public sector.
This may not be a good strategy for efficient and effective achievement of the objective as market driven initiative by the private sector is the more appropriate approach, as adopted by other countries. The current formulation will defeat the efforts of early adoption of environment-friendly and cost-effective technology.
EVs would also have an added advantage of positive impact on the import bill of POL products in the country.
According to the Commerce Ministry, concessionary financing facility by banks for cars is not a good idea rather this should be left to the market mechanism as public transport facilities instead of cars are considered economically and environmentally better option for mobility.
For better economic and trade reasons, the concessionary financing facility should be made available for heavy commercial vehicles/long haul trucks to develop the trucking fleet of the country which will be instrumental in increased trade across borders with CARs, Russia and Europe. This has become more important due to high cost and long delays in shipping of goods via sea.
Unlike Automotive Development Policy (ADP) 2016-21, no incentives have been given for new entrants (OEMS) in the draft policy, blocking the entry of competition effectively while compromising the development of local market and the prospect of export in the future.
One of the most frequent complaints about locally assembled vehicles has been about quality. Though the EDB in the draft policy has reiterated the adoption of WP-29 Regulations; however, nothing concrete was done in this area even though WP- 29 Regulations was also part of ADP 2016-21.
The current scheme is deficient on following counts: (i) only 10.6% Regulations (17 Out of 160 Regulations) have been adopted and specific timeframe has not been given for adoption of rest of the Regulations, instead a vague term of “local market demand” has been used for additional Regulations;(ii) Moreover, these 17 Regulations have been adopted without their subsequent updated versions/additions making the whole exercise meaningless;(iii) no energy and environment related Regulations have been adopted;(iv) the timelines have been kept flexible with complete discretion of EDB which will make the implementation of even these limited Regulations highly improbable; and (vi) in case of imported vehicles, the responsibility has been given to the Ministry of Commerce.
Car imports and current account
Given the already compliant position of imported vehicles in CBU condition, MOI&P/EDB should specifically recommend the inclusion of the subject standards given in the adopted Regulations for incorporation in the IPO from a specific date. The responsibility for examination/certification of compliance at the import stage may be assigned either to EDB or PSQCA.
According to Commerce Ministry, in case of promotion of local parts manufacturing, the exclusion of engine, gear box and transmission parts will dilute this provision as other parts like seats, tyres, etc., are already being manufactured locally and there will be no meaningful value addition without high value added parts of the vehicles. Instead of outright exclusion of these parts, a timeline of 3-4 years for local manufacturing may be included in the Policy.
The reversal of earlier decision regarding reduction in tariff on import of vehicles in CBU condition will increase the protection to the local assemblers, as the incentives/margin of protection has already been enhanced. This will place the end consumers at the mercy of OEMs without any check on issues of price, quality or new value added features in the vehicles locally assembled.
The percentage of exports under export promotion is highly negligible and should either be reasonably enhanced, or some alternative mechanism may be adopted for incentivizing exports.
Import of vintage cars for refurbishment and export needs to be examined in detail in consultation with all stakeholders as such scheme for only vintage cars may not be feasible and which may be dovetailed with scheme for export of such vehicles.
Similarly, in many countries (almost 66% of world’s population), left-hand instead of right-hand vehicles are used and this market currently cannot be served by Pakistani industry.
To address this issue and for export purpose only, the import of left hand drive instead of right-hand vehicles in SKD or CKD condition might be allowed for value addition and subsequent export in CBU condition after consultation with stakeholders.
Import of left-hand vehicles in SKD condition for export only purpose may expedite the adoption of this option by some assemblers for export purposes.
Copyright Business Recorder, 2021
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