ISLAMABAD, June 1: The ministry of industry, production and special initiatives has finalised procedures and modalities for attracting new investment in cars manufacturing besides local assembling of purpose-built taxi cabs.

An official in the ministry of industry told Dawn on Thursday that the procedures were finalised in a committee headed by Prime Minister Shaukat Aziz to encourage entry of new cars manufacturers in the auto sector.

The new policy would be unveiled in the upcoming budget to be announced on June 5, the official added.

The committee had finalised a series of conditions to qualify as new entrants in auto sector but at the same time due protection had been given to the local vendor sector, the official said and added that these policy measures had been approved in the economic coordination committee meeting held recently.

According to the new policy document, which was made available to Dawn, new entrants in the car/LCV sectors will not be applicable to the existing car manufacturers/assemblers even for new models. This would provide protection to local auto parts vendor industry.

Moreover, the deletion programme for the automotive sector will be discontinued and replaced by the Tariff Based System from July 1, 2006.

The agreed conditions necessary for new entrants included — companies producing more than 500,000 units in countries other than Pakistan; companies with a series and significant global presence in auto manufacture; companies which would establish their own assembly plant or have access to a recognise assembly plant and complete paint shop in Pakistan.

The new entrants would be allowed to import 100 per cent CKD Kit/components at statutory custom rate applicable to the import of components not manufactured locally, which would be around 50 per cent. This facility would be available for a period of three years from the start of the manufacturing.

According to the official, regarding import of the 300 black cabs on the analogy of zero tariff import of tractors, it was decided that the companies might be requested to establish LC within 90 days and the process of import and delivery for their cars be completed by June 30, 2007.

According to the incentives finalised to encourage manufacturing of purpose built taxis/motor cabs, it was decided that duty might be charged at the rate of 5 per cent on CKD condition and 20 per cent on CBU condition beyond the initial 300 vehicles by placing them in the light commercial vehicle category. The CBR has been asked to make necessary amendments in the laws, rules for the purpose.

The policy says the intending companies might be required to provide the proof of steps taken for establishing local assembly, manufacturing plant’s land acquisition, technical agreement with foreign firm for joint venture, plan for annual production capacity and plan for setting up after sale service in the country.

The companies concerned might be required to submit bank guarantee equal to the amount of duty waived as a concession under this policy. The bank guarantee will be released as 50 per cent on opening of irrevocable LC for import of plant and machinery and balance 50 per cent on roll out of first taxi cabs.

These locally manufactured taxi cabs must be purpose-built and might not be used for any purpose other than intended use. The fleet of such taxis might be operated by a company with substantial paid up capital, incorporated for this particular purpose. In addition to that, these taxi cabs might not be transferable except to recognized tax fleet operators, added the official.