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New entrants object to Pak Suzuki’s demand

Updated November 30, 2018

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Pak Suzuki had promised establishment of green field plants in return for benefits for 3 years. — File
Pak Suzuki had promised establishment of green field plants in return for benefits for 3 years. — File

KARACHI: Chinese, Korean and French car makers have strongly opposed the move by Pak Suzuki Motor Company Ltd (PSMCL) seeking same benefits/incentives that are marked for new players under the Auto Policy 2016-21.

According to the new policy, existing players receive benefits for three years from the start of production of new models while new entrants are entitled to avail the same incentives for five years.

The demand by Pak Suzuki created quite a debate at the Auto Industry Development Committee (AIDC) meeting held in Islamabad on Wednesday when all existing and new automakers received a copy of the two-page PSMCL letter which had been sent to the Prime Minister Imran Khan a day earlier.

In the letter, Pak Suzuki maintained that ‘if greenfield investment and incentives are given to Pak Suzuki for three years, then the company will invest in setting up state-of-the-art green field plant and introduce new and advance models’.

Soon after some disturbance, the said letter was taken back from the participants.

Sources privy to the meeting said the Engineering Development Board (EDB) had created confusion in the meeting by circulating the PSMCL’s letter among participants. The EDB was soliciting feedback from existing and new players on Pak Suzuki’s requests, a source added.

Talking to Dawn on the condition of anonymity, an assembler who attended the AIDC meeting, said the Auto Policy 2016-2021 does not allow these incentives/benefits under Greenfield investment status to existing assemblers.

He said the same incentives and benefits should also apply on all existing assemblers if they are given to Pak Suzuki. However, the government needs to amend the new auto policy to provide benefits to existing assemblers.

Sources said new players had emphasised the government to let the auto policy continue without any changes otherwise there would not be any attraction for new comers.

A source said the Greenfield policy was made to provide level playing field to new comers and if Suzuki or other existing assemblers receive these, this would be unfair.

Senior executives of PSMCL in a meeting with the prime minister on Tuesday had expressed interest in investing $460 million for setting up a new plant adjacent to an existing plant in Karachi.

However, officials of the Ministry of Industries and Production emphasised in the AIDC meeting that any amendments in the automobile policy would be done in consultation with all stakeholders, including the new entrants.

A major incentive for new investors is reduced 10 per cent Customs Duty on non-localised parts for five years, which is only one-third of rates available to the existing players. Similarly, localised parts can be imported by new entrants at 25pc duty for five years, nearly half of the rates being available to the existing players.

The government has allowed one-off duty-free import of plant and machinery for setting up an assembly and manufacturing facility. It has also permitted import of 100 vehicles of the same variants in the form of completely built units (CBUs) at 50pc of the prevailing duty for test marketing after the ground-breaking of the project.

Published in Dawn, November 30th, 2018

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