ISLAMABAD, May 8: The Engineering Development Board (EDB) on Monday finalised the tariff based system (TBS) which would replace the deletion programme for the local automobile industry to be effective from the fiscal year 2006-07.

A senior official told Dawn that the approved list of items — parts and accessories — of the automotive sector for the TBS had been sent to the Central Board of Revenue for consideration in the upcoming budget.

The list of items were finalised in the 87th meeting of the EDB indigenisation committee headed by its chairman Imtiaz Rastgar. It was attended among others by representatives of Suzuki, Honda, Toyota, Indus Motors and Dewan Farooq Motors.

Under the new policy, it was agreed that those parts, which were locally manufactured would be subjected to a customs duty of 50 per cent.

While those parts, which were imported as CKD would attract customs duty at a rate of 35 per cent as an attempt to reduce the cost of imported inputs used in the manufacturing of the cars in the local market.

According to the official, the auto industry would be free under the TBS to source its components from where found it economical and that the manufacturers should not be forced to buy from any specific sources.

Analysts said with the new policy, the margin of protectionism to local manufacturers of parts would now reduce to only 15 per cent in duty under the TBS system.

They feared that some international auto players would dump their parts in Pakistani market under the new system as CBR has no mechanism to check under invoicing.

The introduction of the TBS system from the next fiscal year would put an end to Pakistan’s last deletion programme for the auto sector under the agreement for trade related investment measures (TRIMs) after enjoying five-year extra waiver from implementation of TBS.

When contacted EDB Chief Executive Imtiaz Rastgar said that it was a historic event that auto sector was moving from deletion to TBS. He added that the committee authorised the EDB to make corrections in the list in consultation with all stakeholders.

He said that it was the final meeting, in which the list was finalised for announcement in the next budget. Mr Rastgar said that the EDB was studying the rules and regulations of South Africa’s Motor Industry Development Plan (MIDP) to develop motor industry in Pakistan.

When asked why African MIDP was chosen for the purpose, he said that the auto sector in South Africa was of a similar nature to that of Pakistan. “Although we have also studied other models—Indian, Thailand, Chinese and Australia etc but these were not applicable to Pakistani environment,” he added.

He said the new policy would give incentives for local value addition and on export of cars as government was already spending huge amount of foreign exchange on import of oil.