Proposed tariff rationalisation plan: local auto industry expresses concern

The local auto industry has expressed concern over proposed tariff rationalisation plan which would provide extraordinary benefits on import tariffs for new entrants, putting the existing automakers in a disadvantageous position.
A representative of local auto industry told a group of journalists here on Saturday that the proposed tariff rationalisation plan seeks to reduce import tariff for cars from current 50 percent to 25 percent and for new entrants car makers to be provided with special incentive of importing CKD cars on minimum slab of 5 percent customs duty in their first year of production.
At present, cars in completely built unit (CBU) condition are importable on 50 percent import tariff and local industry has the incentive to import cars in completely knockdown (CKD) condition on 32.5 percent import tariff and local industry is enjoying 17.5 percent import tariff protection.
The proposed rationalisation plan seeks to reduce the import tariff for CBU condition cars on 25 percent and local industry does not know at what rate it would be allowed to import CKD cars and what level of protection would be provided to it after implementation of tariff rationalisation plan, he said.
He said that the government is planning to allow new entrants in the auto industry on their imports of CKD condition cars at 5 percent import tariff in first year, 10 percent tariff in second year and 20 percent tariff in third year and then they would be treated at par with existing automakers.
Earlier, the auto industry had agreed with the government that only those new entrants would be allowed, who would have annual production of 500,000 cars per annum. However, the government had reduced the limit to 100,000, and latest reports suggest that the government may further reduce the cap lower than 100,000 cars per annum.
He said that the government has to seriously consider the impact of the change in the criteria for the new entrants on local auto industry. The new entrants, having low production capacity may not be able to bring technical know-how, skills and transfer of technology as this can only be done by new entrants with vast production capability and technology.
The auto industry representative questioned as to what would happen to tariff protection available to the local vendor industry under the proposed tariff rationalisation plan when it would be finalised. The representative of auto industry said that actual tariff rationalisation plan, prepared by the foreign consultant of Planning Division, has not been shared with the local industry for examination and review, and they are unable to prepare their input for the government for the proposed plan.
The recommendations of the proposed tariff rationalisation plan, finalised by international consultants, are lying with the Planning Commission and local auto industry has been provided opportunity through Engineering Development Board to give its input on such plan, he added.
On behalf of local auto industry, he proposed imposition of 'car transfer tax' to eliminate the 'own' charged by the investors (artificial buyers) in case the investor transfers his car within 3-6 months' time after delivery. "Whatever rate should be introduced by the government, but the government must impose 'car transfer tax'. Similarly, excise departments, authorised to register new cars, should be bound to register cars in the names of the owners who have got their delivery from the maker, and not in the name of the second buyer who pays the 'own' to get possession of car upon registration", he added.
He said that the local auto industry believes that the proposed 'car transfer tax' would be instrumental in eliminating artificial buying of cars in local market, and benefit the people who have booked their cars. About high prices of locally produced cars, he said that car prices were reasonable at a time when Japanese yen was equivalent to Rs 0.50 and now yen and rupee parity has changed to Rs 1.23 per Japanese yen.
From July 1, 2012, Pakistan's local auto industry would be required to convert the entire car production on euro-II compliant and this would add up in the cost of cars to be produced in the country. Explaining the impact of reduction in import tariffs on old and used cars by the government importable under Gift Scheme, personal baggage scheme and transfer of residence scheme, he opined that local buyers have not benefited much as the prices of old and used cars have witnessed 60 percent increase due to change in rupee and yen parity.