Govt might abolish protection of auto Industry Development Plan-II

ISLAMABAD: The government has proposed to abolish the protection of Auto Industry to provide fair competition to existing players which will go a long way to bring down the prices of locally made vehicles.

However, Auto Industry has expressed its deep reservations over government proposed five year (2012-17) Auto Industry Development Plan-II, said an official of Auto industry.

According to an official of the Ministry of Industries, the government wants gradually reduce the protection of Auto Industry by reducing the tariff of Complete Build Unites (CBU) to ensure availability of imported substitutes for consumers at affordable prices and by rationalizing tariffs of Complete Knock Down (CKD) to provide fair competition to existing players through new investments and more options for consumers.

“The government proposed technological up – gradation of the vendor industry to rationalize the prices of locally made vehicles by introducing fair competition for existing assemblers,” said the official, who spoke on the condition of anonymity.

The government also proposed reduction in the tariff of upto 1000cc cars from current 55 per cent to 40 per cent for next five years, for 1001 to 1500cc from 60 per to 50 per cent, an increase of 5 per cent has been proposed 1501to 2000cc cars from current 75 per cent. The tariff of CKD for non-localized is currently 32.5 per cent while it was proposed 20 per cent for next five years, for CKD localized it is proposed 35 per cent against its current tariff of 50 per cent. LCV’s tariff is currently 60 per cent while it is proposed 50 per cent for next financial year 2012-13.CKD and component localized tariff is currently 50 per cent while it is proposed 35 per cent for next five years.

According to the official, the government has also proposed reducing Tariff slabs for CBU import of cars from existing 5 to 4, in line with HS Coding System of World Customs Organization. Rationalizing CKD & CBU tariffs in line with the trends followed by successful economies of the Region.

Official further told that the government also proposed withdrawal of Regulatory Duty of 50 per cent on cars exceeding 1800cc, being an impediment to growth in this segment and revisiting the existing schemes for import of used vehicles so as to circumvent misuse there of, besides encouraging import of new vehicles over the old and used ones.

“Lowering CKD rate and simultaneously keeping CBU rate higher is not only in line with the trend followed by successful Regional economies, but would also attract new investments, technology transfer and providing even playing field to existing assemblers and vendors in view of MFN status to India,” added the official.

The official further explain that a higher rate for CBU import would encourage local assembly/ manufacturing over imports, there by attracting investments and simultaneously safeguarding foreign exchange reserves, besides creating more creating more employment opportunities.

It is note worthy that car industry heavily protected since 1980s, resulting in stagnation of technology CKD rate determined in late 1980s at 35 per cent. The industry has attained sustainable growth with broad vendor base coupled with an increasing local demand. Objectless of proposed tariff changes to encourage technological up- gradation and competitiveness of the industry by reducing tariff rates on CKD— both locally and non-locally made parts.

The Industry had showed significantly growth during the period 2003-05 to 2006-08 whereas global recession in 2008-09had an adverse impact on the growth trend which declined the production from 176,213 units in 2007-08 to 83,814 units in 2008- 09 in the car segment. Similar decline noticed in other segments except the Tractor industry the car, LCV, & motorcycle industry now in the revival stage beginning 2009-10. Trucks &Bus industry could not revive and still in declining state.

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