19 May 2004	Wednesday	28 Rabi-ul-Awwal 1425

LAHORE, May 18: Car makers want the government to restructure the country's tariff regime for the auto industry on the lines of India to make it more favourable for the local manufacturers.

"The government must evaluate the strategic objectives for the industry and put in place a tariff regime that encourages demand, promote growth and prevent Pakistan from becoming a dumping place for the international rejects," urged a senior executive of a car company while speaking to this reporter on Tuesday. He said, "such measures should be incorporated in the budget for 2004-05".

He claimed that the restructuring of the tariff regime for the auto industry must not be delayed if government wanted further investment in this sector. "If we compare Pakistan's tariff structure with the Indian tariff regime, we would see that our car industry is at disadvantage," he maintained.

"The accumulated duties on the imported CKDs in India stand at 36 per cent, including 20 per cent customs duties and 16 per cent sales tax/VAT, against total taxes of 50 per cent - 35 per cent customs duty and 15 per cent sales tax - in Pakistan," the executive said.

He said import of parts for manufacturers in India was cheaper by 10 per cent than in Pakistan. Indian manufacturers pay only 20 per cent customs duty and 16 per cent additional customs duty and their Pakistani counterparts pay 25 per cent customs duty, 15 per cent sales tax and six per cent income tax on imported parts.

On the import of CBUs, Indian manufacturers pay customs duties of 105 per cent, additional customs duty of 24 per cent, calamity contingent duty of one per cent and cess of 0.125 per cent.

While the car industry in Pakistan pays 20-150 per cent customs duties, 15 per cent sales tax, 6 per cent income tax, 1 per cent calamity contingent duty and up to 7.5 per cent capital value tax.

"Similarly, India has imposed customs duties and other taxes of 180 per cent on import of used cars. The high rate of customs and other duties imposed on import of used cars in India are aimed at stopping the import of reconditioned cars, according to the local manufacturers. In Pakistan taxes and duties for the imported cars between 1300cc and 1600cc vary from Rs200,000 to Rs260,000," he said.

"The comparison shows that the Indian tariff structure is more favourable for their domestic industry," he said, adding "Pakistan should also restructure the tariff regime for its car industry to encourage growth in this sector."

The executive said the favourable Indian policies had resulted in the production of one million vehicles a year there and export earnings of $800 million (in 2002-2003). The Indian industry will increase its exports to $1 billion by 2005.

"India's auto policy clearly outlines the official strategy of favouring local production over imports," he said. "Besides enjoying favourable tariff structure, the Indian auto industry is also protected through non-tariff barriers," he said. "Imported vehicles in India need to undergo tests by its agencies to ensure that poor quality, fuel inefficient and old vehicles do not enter the market."

The imported vehicles have also to "conform" to the Indian EPA standards which are yet to be developed in Pakistan that makes it more prone to the import of substandard vehicles with higher fuel emissions, the executive said.

Cars older than three years from the date of its manufacturing are not allowed to be imported and the importers have to submit a pre-shipment certificate that the vehicles conform to regulations specified in the Motor Vehicles Act 1988 of India.