Proposed new policy: FBR opposes incentives for existing auto players

Argues they have failed to adopt modern technology

ISLAMABAD: The Federal Board of Revenue (FBR) is not in favour of giving incentives to existing automotive industry players in the new policy as it argues they have already got relief and concessions but failed to achieve objectives of the deletion programme, officials say.

The FBR’s views came following a proposal floated by the Ministry of Industries and Production for offering incentives to the auto players under three categories including the green and brown schemes.

The first category relates to the new entrants. For these players, the Ministry of Industries has advocated a reduced 10% duty on the import of parts in a bid to attract investment and break the monopoly of existing auto manufacturers. The FBR has welcomed this proposal.

In the brown scheme, incentives will be offered to existing players for bringing new brands. However, the FBR has stopped short of giving its backing to this category, saying these players have failed to adopt modern technology despite getting incentives for years.

The third category of incentives has been proposed for the auto units that have been shut down due to some reasons. The ministry has suggested lower import duties in the range of 10% to 15% to help the plants start operations again.

“Though consultations have been made but delay in approval of the new policy is due to unavailability of Water and Power Minister Khawaja Muhammad Asif who heads the committee that has worked for two years to come up with the draft of the auto policy,” an official said.

To achieve the objectives, the committee has proposed easing the entry conditions for new investors, putting in place an enabling structure for development of the industry and rationalising the auto import policy.

It has also called for establishing regulatory and enforcement mechanisms for quality, safety and environmental standards and setting up the Pakistan Automotive Institute. Measures to ensure consumer welfare through the provision of quality vehicles with safety features were also part of the proposals.

In August, a summary was tabled in a meeting of the Economic Coordination Committee (ECC) but it could not be approved.

During deliberations, Asif tried to persuade Finance Minister Ishaq Dar to give the go-ahead to the new policy, assuring him that nothing had been left untouched in the draft. However, Dar, who is also the ECC chairman, looked unconvinced and turned down the request.

During the huddle, Industries Secretary Arif Azim outlined different categories of investors with the incentives that would be offered to them. However, FBR authorities countered that the incentives were not adequate enough to stimulate fresh capital injection.

Replying to a query from the ECC chairman, the industries secretary acknowledged that the plan had no explicit provision for the deletion programme, which was not consistent with the World Trade Organisation (WTO) framework.

However, he said, the objectives of the deletion programme would be achieved indirectly through building tariff walls. The deletion programme refers to less reliance on the import of auto parts and increased use of local parts in auto manufacturing.

The ECC chairman directed the secretaries of industries, revenue division and commerce division to review different aspects of the automotive development plan in the next two weeks and made public the draft plan to invite their feedback.

Published in The Express Tribune, December 18^th,  2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.