ISLAMABAD, Aug 25: Ministry of Commerce has proposed to the ECC that new entrants in the motorcycle industry to be allowed to start production with 25 per cent locally manufactured parts and would be required to achieve 85 per cent localisation upon completion of five years.
“Those units not achieving the localisation plan would be penalised and to be required to pay duties equivalent to rate applicable on import of parts they would be importing during first five years,” the summary of commerce ministry said.
The summary is based on the recommendations made by a sub-committee of the ECC, headed by the Minister for Information and Broadcasting.
The sub-committee after its meeting held on July 17, 2012 agreed on general tariff reductions and new entrant policy for the motorcycle industry to encourage the introduction of new technology, exports and availability of a wider range of products for the consumers and recommended bringing down duty on import of sub-assemblies from 20 per cent to 10 per cent.
The other recommendation includes import of Completely Build Unit (CBU) and components for assembly or manufacture of vehicles in any kit form from 65 per cent to 10 per cent.
For Completely Knocked Down (CKD) kits not manufactured locally 15 per cent to 5 per cent, CKD kits manufactured locally the tariff are suggested to be reduced from 47.5 per cent to 25 per cent.
However, duty on import of raw materials has been proposed to be maintained at 0 per cent and sub-components and components at 5 per cent.
The new entrant policy would be applicable on motorcycles of 100cc and above with new technology and the concessionary rate of duty for CKD kits shall be 5 per cent.
The ECC has already discussed the issue of providing protection to the local motorcycle industry and after the review of the summary it was decided to form a committee comprising secretary industries, chairman BoI and secretary commerce to present a detailed presentation of the sector.
The latest summary forwarded by the commerce ministry covers points related to new entrants, their requirements, optimal protection, view point of existing a producers and impact on general public.
Our Reporter adds from Karachi: Meanwhile, the auto parts manufacturers, opposing the proposal to reduce duties on import of CBUs, have said the decision seems to be another well-conceived plan against the fast growing local bike industry.
Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM) Syed Nabeel Hashmi said China, the largest bike producer, still maintains a custom duty of 90 per cent on CBU import while India, the second largest producer, keeps a tariff rate of 60 per cent.
Hashmi feared destruction of local engineering industry and endanger millions of jobs and investment in case duty on CBU import rate is reduced sharply.
PAAPAM Vice-Chairman Munir K. Bana wondered why an industry not even seven per cent the size of China and merely 14 per cent the size of India needs to bring down its tariffs to such levels where the local auto manufacturing industry will be turned into a trading market.
The association strongly urged the government not to indulge in any policy changes for an industry, which has been an excellent example of localisation and growth over the last five years in spite of the country’s worsening economic and law and order situation.
He said that the local industry is already absorbing shocks of power shortage, inflation and increase in cost of doing business. On the other hand, policies are made behind the closed doors without consulting the actual stakeholders, he added.