Reducing age limit for import of old and used cars

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Weekly Updates - Traders' Diary

The Economic Coordination Committee of the Cabinet (ECC) on Tuesday constituted a high-level committee to look into a proposal for reduction in age limit from existing five years to three years for import of old and used cars into the country to save the local industry from collapsing, official sources informed.

The committee will be headed by Deputy Prime Minister Pervaiz Elahi and include top officials like ministers of production, commerce, industry, and Federal Board of Revenue (FBR) and it has been decided that the committee will present its recommendations in the next ECC meeting for a formal decision on the proposal.

The ECC meeting was held under the chiarmanship of Finance Minister Dr Abdul Hafeez Shaikh. The Ministry of Industries had approached the ECC by arguing that local auto industry is on the verge of collapse as the prices of old and used cars being imported into the country under Transfer of Residence, Gift Scheme and Personal Baggage Scheme are very near to the prices of locally manufactured cars. The increase in age limit of old and used cars for import under the said schemes has not helped the consumers as the local cars prices have not been decreased and existing policy of allowing import of five years old and used cars have negatively impacted the local auto industry which is employing directly or indirectly over 200,000 people in the country. Some Rs 82 billion investment in car assembly and manufacturing industry and a large number of people in the vender industry are facing negative impact of huge imports of old and used cars as local demand is decreasing while imports are increasing.

The country’s requirement of cars is estimated at 200,000 units per year and at present local industry is making only 154,255 units and some 55,112 old and used cars and 1,861 jeeps have been imported making a total of 56,973 old and used units into the country. Some 37 percent local demand is being met through import of old and used cars, which is hurting local investors as well as local vender industry and discouraging new investment in the country. It has also been informed to the ECC that the local industry is capable of meeting country’s demand having capacity of producing 250,000 units per year and vender industry also needs opportunities for providing parts for local manufacturing of cars. It has been requested to ECC that age limit of old and used cars imported into the country be decreased from existing five years to three years. After reviewing the liquidity conditions of Pakistan International Airlines Corporation (PIAC), the ECC extended repayment period for loan (Sukuk Certificates) of PIAC for two years. In the same way, after considering the severe liquidity crisis faced by PIAC, ECC approved to issue guarantee for fresh loan of Rs 9.36 billion to PIAC. However, ECC directed PIAC officials to present their detailed business plan in the next ECC meeting.

The ECC also approved federal government’s guarantee for Rs 9.3 billion fresh loan from National Bank of Pakistan. This loan would be obtained in five instalments of Rs 1.7 billion, Rs 1.33 billion, Rs 1.33 billion, Rs 1.33 billion, Rs 2 billion and Rs 3 billion, respectively for one-year term at three months KIBOR plus 1.5 percent interest rate.

According to the general tariff reduction for motorcycle industry in Pakistan, the ECC maintained customs duty on import of raw materials at zero percent, sub-components and components 5.0 percent. Customs duty on import of sub-assemblies has been reduced from 20 percent to 15 percent. Customs duty on import of motorcycle in completely built units (CBU) and components for assembly or manufacture of vehicles and kits has been reduced from 65 percent to 57 percent. Customs duty on import completely knocked-down (CKD) kits not manufactured locally have been reduced from 15 percent to 5.0 percent and customs duty on import of CKD kits manufactured locally has been reduced from 47 percent to 30 percent. It has been also decided in ECC meeting that tariff regime for the motorcycle industry would be revised after each year to facilitate it as well as protect it from foreign competition.

The ECC also approved upgradation of capacity of Wah Brass Mills (Pvt), Project of Wah Industries, from 7,000 metric tonnes to 24,000 metric tonnes. In order to achieve this enhanced capacity, ECC approved a loan of $16 million at the rate of annual average cost of borrowing of the government for fiscal year 2012-13 to be repayable over a period of seven years and issuance of letter of comfort or sovereign guarantee against loan facility to POFs Wah amounting to $59.4 million, as demanded by Ministry of Defence.

The ECC also discussed a summary on ‘Policy Guidelines for Energy Efficiency Audit of Captive Power Plants and Natural Gas Boilers’, proposing reduction in efficiency benchmark for gas engines, gas turbines, combined cycle and boilers. As the comments from Ministry of Water and Power and Ministry of Textile Industry were not presented in the summary, it was decided to reconsider the summary in the next ECC meeting after receiving the formal comments from both the ministries.

On the summary of ‘LPG Production and Distribution Policy 2012’, law and justice minister remarked that comments by his ministry are not present in the summary. After discussing the different dimensions especially arguments given by the law and justice minister, the ECC decided to reconsider the summary in the next meeting after having formal comments by the Law and Justice Division.

The ECC discussed in detail on the allocation of gas to fertilizer plants from dedicated sources. It was informed to ECC that a total of 202 million cubic feet per day would be made available through newly discovered fields and the fields having additional gas. It was proposed to allocate this additional gas to four fertilizer plants. It was also informed that 1,000 kilometres long pipeline would be required to be established in order to utilise this additional gas from the fields. After considering the different aspects of the proposal, the ECC gave in principle approval for establishment of 1,000 kms long pipeline


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