Opening of LCs for import of CKDs: finance urged to abolish 100 percent cash requirement

Pakistan Automotive Manufacturers Association (PAMA) has requested the Ministry of Finance to abolish the requirement of 100 percent cash margin for opening of LCs for import of CKDs of automotive vehicles.
In a letter sent to the ministry, the PAMA stated that State Bank of Pakistan through a notification ERD/M&PRD/PR/01/2017-16 imposed 100 percent cash margin requirement on the import of certain consumer items including motor vehicles (both in CBU and CKD condition).
Following the said requirement, the automotive industry, which is just progressing towards growth after facing a decline in last couple of years, is now facing knock down condition in the import of CKD, which is an input material for vehicle manufacturing.
"PAMA is supportive of these measures if imposed on import of non essential items mainly in finished form which in case of automotives are Completely built-up (CBU) units /vehicles. The imposition of 100 per cent cash margin on import of CKDs (for manufacturing vehicles) has shaken the confidence of foreign investors and will also increase the cost of doing business," it said.
"This measure will give competitive disadvantage to local assemblers, over import of used cars under baggage scheme, normally making payment through TT remittances and other channels".
Besides such measures on CKD import, PAMA fears considerable decline in sales volume which may adversely affect the revenue to the government. Keeping the said in view, the PAMA has requested the ministry for wavier of the condition of 100 percent cash margin on import of CKDs for local vehicle manufacturing operations, the letter said.