Upcoming auto policy: Govt refuses ban on imported vehicles

Wants to break monopoly of local players in market.

ISLAMABAD: The Ministry of Commerce has expressed reservations about the high price and poor quality of locally assembled cars, raising the objections in the backdrop of automakers’ demand from the ministry to impose a complete ban on the import of used cars in the proposed auto policy, officials say.

The Engineering Develop­ment Board (EDB) has refused to support the proposal of placing the ban on the import of used cars, saying it would strengthen the monopoly of the local carmakers and auto part manufacturers.

The car assemblers also urged the government not to reduce the duty on auto parts. This will maintain the local players’ monopoly over the manufacturing of auto parts, the reason for high prices of local cars.

However, the government has expressed the intent to reduce the duty in order to make the market more competitive by facilitating new entrants.

The previous government had reduced the age limit on imported used cars from five to three years under the influence of the car assemblers in February 2013.

Meanwhile, economic managers of the PML-N, in an Economic Coordination Committee (ECC) meeting held in October 2013, noticed this monopoly of the car industry and suggested that the tariff protection for new entrants should be given for five to seven years.

Sources told The Express Tribune that key stakeholders in the government, including the Federal Board of Revenue (FBR), Ministry of Industries and EDB, have refused to support the proposal of placing a ban on the import of used cars as it would strengthen the monopoly of local carmakers and auto part manufacturers.

After failing to get support of these stakeholders, the Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) approached Commerce Minister Khurram Dastgir to win his backing for imposing curbs on car imports and raising duties on equipment.

A Paapam delegation met the commerce minister on Thursday and urged him to play his role in imposing the ban. However, officials of the commerce ministry raised the issue of poor quality of cars and their high prices.

Industry representatives told the minister that all issues in the proposed auto policy had been settled with the EDB, but two issues were yet to be resolved. They included a ban on import of used cars and no cut in duties on import of auto parts.

During the meeting, they attributed the rise in car prices to inflation and depreciation of the rupee against the dollar.

However, officials said the quality of locally made cars was deteriorating with the passage of time. They said even the quality of imported used cars was far better and therefore consumers were switching to them.

The minister said the commerce ministry had no direct role in the auto sector, including import of used cars.

According to officials, the FBR was of the view that the age of used cars for import should be extended to five years from the current three years to facilitate the consumers by ending the monopoly of key industry players.

It argued that the government had given incentives to the local car industry but it did not flourish and consumers were facing even higher prices.

Published in The Express Tribune, January 31^st, 2015.

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