ISLAMABAD, Dec 12: The government and the automobile industry differed strongly on Tuesday over the cascading five-year tariff reduction but reached consensus on incentive part of the Auto Industry Development Programme (AIDP) proposed by the Engineering Development Board (EDB).

Speaking at a news conference after day-long consultations with the industry, EDB Chief Executive Imtiaz Rastgar played down a strong opposition put forward by the automobile industry over introduction of tariff reduction programme saying the stakeholders "almost reached consensus on tariff part as well".

Shariq Sohail, head of Rubatech and Pakistan Autoparts Manufacturers Association, however, told Dawn that the tariff reduction plan proposed by the EDB was "totally unacceptable" because it would result in collapse of the industry because of such a steep reduction in tariffs.

He said the industry had demanded that annual tariff reductions should be staggered to three years and as a result, the reduction programme should be spread over nine years instead of five years.

When Mr Rastgar was asked how would he define or bridge the gap between "near consensus" as he claimed and the "totally unacceptable" position as stated by the industry, he said the industry did not express such views during the consultations.

Asked to comment on the demand from the industry for increasing the prices of tractors reportedly frozen for the last 10 years, he said he agreed with the industry that it was an anomaly and there was no justification for freezing tractor prices and hence should be removed.

However, the automobile industry agreed with the EDB on the non-tariff part of the draft policy. Representatives of tractor manufacturers objected to the issue of capped prices of tractors and they demanded of the government to get the tractor industry rid of the "anomaly". Their demand was that let the market forces determine the prices of tractor unit.

He said the EDB would hold another consultative session on Friday (December 15) and then try to complete the whole process within this month. He hoped the long-term policy would be announced with the next year budget.

Imtiaz Rastgar said that local automobile sector was included in the highly sensitive list and the Pakistan-China Free Trade Agreement (FTA) would have no negative implications for the local industry.

The automobile industry will continue to be protected, said Zahid Yaqoob, an EDB director.

Rastgar said that there were some differences over the tariff structure. However, the auto industry and auto parts manufacturers hailed the incentives being offered to the stakeholders in the draft AIDP, he said. He said that the local assemblers had agreed that they would increase the local production of cars and other automobiles with special emphasis on local manufacturing of high value added components.

He claimed that the representatives of automobile industry were largely agreed with the customs duty proposed in the AIDP. He said that prices of automobiles were always an issue and the government and the automobile industry were always in consultation on the issue. He said that long-term policy was the need of the industry, after it switched over from highly protected deletion programme to Tariff Based System (TBS).

Speaking at the workshop, Minister for Industries, Production and Special Initiatives Jahangir Khan Tareen said the importance of the auto industry was a key to the economic development. He said that the auto industry because of its forward and backward linkages and economic multiplier effects would contribute to register a robust growth for considerable period.

The minister, however, took note of various challenges faced by auto assemblers and vendors and said that the AIDP aims at addressing these challenges. Tareen added that the government wanted to encourage growth, promote domestic competition, enhance competitiveness and stimulate innovation through the proposed policy.

He hoped that the policy framework of the government would double the contribution of auto industry to GDP to 5-6 per cent in 2011-12 from present 2.8 per cent, with turnover of Rs600 billion and export to $350 million and $300 million for CBUs.

He said the vendor sector had become very vibrant, major job provider and a potential necessary for the engineering skills, know-how and integration of technologies in other sectors.