According to official documents, the AIDC will discuss implementation of ADP 2016-21 regarding reimbursement /adjustment @ Kibor plus 2 per cent on delivery beyond 60 days and recommend a legislation. Automotive Development Policy 2016-21 was approved by the ECC of the Cabinet on March 18, 2016 which became effective from 1 July 2016. Under the policy certain consumer welfare measures were taken by Government of Pakistan to facilitate end consumers. Among the other measures the following measure was taken to address vehicle delivery issues:
The amount of advance payment shall be limited up to 50 percent of the total price. Price and delivery schedule, not exceeding two months, shall be firmed up at the time of booking. Any delay over two months shall result in a discount @ KIBOR+2 percent prevailing on the date of final delivery/settlement from the final payment, which shall help shorten delivery lead time.
In pursuance of the ECC's decision, Ministry of Industries & Production issued a notification which was circulated by EDB to OEM's to ensure compliance. Among the car manufacturers so far, M/s Honda Atlas Cars (Pakistan) Ltd, and M/s Indus Motors Company Ltd, have shown compliance while feedback from Pak Suzuki Motor Co Ltd is awaited. Ministry of Industries & Production's recent stance on the matter is to discuss the issue in AIDC.
The sources said, M/s Regal Automobiles Industries Ltd (RAIL) applied for the greenfield investment incentives under New Investment Policy of ADP 2016-21 for establishing auto assembly plant in Lahore for the production/ assembly of light commercial vehicles (LCVs) and Mini Van/ Bus. RAIL has signed Technology Transfer agreement with DFSK Motor Co Ltd, a subsidiary of Dongfeng Motors Corporation, China. Initially, M/s RAIL did not have exclusive rights for assembly/manufacture & sale of DFSK Motor Co Ltd's vehicles in Pakistan. However, after completion of first year their principals have agreed to provide exclusive rights to RAIL.
M/s Tayyaba Motors (Pvt) Limited approached EDB informing them that M/s RAIL's principals are the same ie Dongfeng Sokon and DFSK, even their factory address is the same. Further, they have noted that vehicles offered by both of them are physically the same with the only difference of label/ logo. In view of the above M/s Tayyaba Motors (Pvt) Limited requested that M/s Regal Automobile Industries Ltd, cannot avail the concessions of Greenfield investment under ADP 2016-21.
According to sources, M/s Daehan Dewan Motor Company (Pvt) Ltd, applied through BoI for revival of manufacturing plant M/s Dewan Farooque Motors Limited (DFML) and requested for grant of brownfield investment under the Automotive Development Policy (2016-21) for the production of Shehzore (LCV) and Ssangyoung (SUVs) vehicles.
Earlier, DFML plant operations were initially shut down in October 2010, (with in hand stock of 908 kits of CKD including 210 Santro and 698 of Hyundai Shehzore). After special approval of Auto Industry Development Committee (AIDC) (16th meeting) DFML resumed production from September 2013 to February 2014 to consume the left-over inventory. At that time, ie September 2013 to February 2014, M/s Dewan Farooq Motors did not have an agreement with the principal for further import of CKD and the company just wanted to utilise the CKD already lying with the company.
As per ADP 2016-21 "brownfield" Investment is defined as revival of an existing assembly and/or manufacturing facilities, that is non-operational or closed on or before July 01, 2013 and the make is not in production in Pakistan since that date. A meeting was held in Ministry of Industries & Production to discuss the issue in detail. According to the minutes of the meeting, EDB was required to review the case in AIDC. The AIDC keeping in view its previous decision (16th meeting of AIDC), is required to discuss the following:
In view of no CKD imports the lapse of agreement date and temporary operations to consume left-over inventory from September 2013 to February 2014, the plant can be considered as operational. Engineering Development Board (EDB) has sought AIDC's advice with regard to benefits under brownfield investment category to DFML.
M/s Al Haj Faw Motors (Pvt) Ltd, the manufacturer of trucks, prime movers, light commercial vehicles and vans intend to invest in car manufacturing. BoI has recommended incentives under New Investment Policy of ADP 2016-21 to M/s Al Haj FAW. EDB has sought AIDC advice on this issue keeping in view the investment categories ie Greenfield investment or brownfield investment, elaborated in the ADP 2016-21.
EDB has consulted the issue with different stakeholders and the common understanding developed is as follows: either the benefit will have to be extended to existing players for certain time period lesser than Green field investors (say 2 years)
If an existing player intends to invest in different category of vehicles ie a truck manufacturer to launch a car or vice versa may be considered for grant of incentives. The AIDC will also discuss Free Trade Agreements (FTAs) with Thailand and Turkey and Pakistan's stance. The sources said, a PAAPAM delegation visited Bangkok last month and a meeting was organised through Embassy of Pakistan in Bangkok. PAAPAM is requested to update its stance on FTAs with Thailand & Turkey keeping in view national interest and to ensure a win-win situation for partner countries. AIDC is requested to advise future course of action.
The committee will consider amendment in SRO regarding installation of E.D Paint facility for cars, LCVs and HCVs. ED paint facility was mandatory under SRO 656(1)/2006 dated 22.06.2006 for OEMs manufacturing HCVs in the country from a couple of years. However, this restriction was also implemented on Cars & LCVs manufacturers in the Budget 2016-17 and is effective from 1st July, 2016. Three Japanese car manufactures already have this facility; however, this facility was not available with some LCV manufacturers. These LCV manufacturers approached EDB stating that the installation of ED paint facility requires heavy investment as well as time and requested for relaxation for some time so that they can install this facility at their plants. EDB has also sought relaxation be extended to New Investors applying under ADP 2616-21?
Copyright Business Recorder, 2017