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ISLAMABAD: The Federal Cabinet has constituted a three-member ministerial committee aimed at luring Original Equipment Manufacturers (OEMs) and electronic goods manufacturers in setting up engine and compressor manufacturing facilities in the country, well informed sources told **Business Recorder.**

The decision was taken by the Federal Cabinet, in its meeting held on December 21, 2021, while ratifying minutes of the Economic Coordination Committee (ECC) of the Cabinet taken on December 16, 2021.

The Ministry of Industries and Production gave a presentation on the incentives and targets made part of the Auto Industry Development and Export Policy (AIDEP) 2021-26, finalised after threadbare discussions with the stakeholders.

During discussion, the importance of localization was highlighted by the members of federal cabinet. It was exhorted that OEMs should be encouraged and facilitated to manufacture car engines in Pakistan.

Responding to the queries of cabinet members, Minister for Industries & production, Khusro Bakhtiar noted that to evoke interest of OEMs in manufacturing engines, the domestic production of cars should at least be 500,000 units per annum, which currently was hovering around 250,000 units.

The cabinet members were of the view that Chinese OEMs could perhaps be approached to set up engine manufacturing facilities in Pakistan.

The Adviser to the Prime Minister on Commerce & Investment, Abdul Razak Dawood, was of the view that no new licences should be issued as already 15 manufacturers were present in Pakistan and no new models should be allowed as well. The AMAX should be regularly updated, there should be no rollback and the duty structure for the auto sector should be reviewed.

The need to solicit interest in manufacturing of electrical vehicles was strongly highlighted. It was noted that despite announcement of a very attractive EV Policy, no interest could be generated due to limited market.

The ECC, in its decision, made it clear that export targets are indicative which will be reviewed and enhanced periodically. The OEMs will also be facilitated for local manufacturing of left-hand drive vehicles for export purpose. The obligatory export as a percentage of import value has been fixed at 2 per cent for 2022-23, 4 per cent for 2023-24, 7 per cent for 2024-25 and 10 per cent for 2025-26.

The new product policy will be extended for up to 1000 cc instead of 850 cc vehicles. The ECC has also urged that utmost efforts be made to shift a general tariff regime after the end of AIDEP 2021-26 whereas localization shall be targeted to attain maximum possible value addition within Pakistan.

After detailed discussion the Federal Cabinet ratified the decision of ECC in the case titled “Auto Industry Development and Export policy (AIDEP), 2021-26,” with the stipulation that the new product policy shall be applicable on the introduction of new models of cars only and not the current.

The Cabinet also constituted the following Committee to deliberate and solicit interest of OEMs and electronic goods manufacturers in setting of engine and compressor manufacturing facilities in Pakistan: (i) Minister for Industries & Production (Convener);(ii) Adviser to the Prime Minister on Commerce & Investment; and (iii) Adviser to the Prime Minister on Overseas Pakistani & Human Resource Development (OP&HRD).

Copyright Business Recorder, 2021

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