New entrant in motorcycle industry: Mandviwalla fails to guarantee incentives | Business Recorder
New entrant in motorcycle industry: Mandviwalla fails to guarantee incentives
Former Finance Minister, Saleem H Mandviwalla, failed to guarantee incentives for a noted motorcycle brand as new entrant despite all efforts till last day, well informed sources told [I]Business Recorder.The company has announced investment of $150 million in Pakistan to manufacture Yamaha motorcycle in Pakistan.
A meeting was convened on March 14, 2013 in this regard on the pressure of the then Finance Minister, however, Secretary Industries, Shafqat Naghmi foiled his endeavour to notify the incentives for M/s Yamaha in the that meeting by constituting a submit committee under the chairmanship of CEO Engineering Development Board (EDB). CEO EDB is brother in law of Secretary Industries and a former employees of one the subsidiaries of House of Habib.
Official documents reveal that Secretary Industries observed that new entrant policy should be defined based on economic considerations wherein new entrant in the automotive sector may be allowed a head start over existing players and lead time for development of vendors and related infrastructure. He suggested that EDB may include motorcycle as part of the auto policy.
The tariff incentive for different auto sector may, however, be different for all kind of vehicles including motorcycles. The Chairman emphasised the need for a clear definition and qualifying criteria for new entrants covering all aspects including technology. The representative of Board of Investment (BoI) suggested that for the time being the exercise should be confined to the new entrant motorcycle as contained in the SRO issued by FBR.
The chair decided to set-up a sub-committee under the chairmanship of CEO, EDB and with members from Board of Investment and Ministry of Commerce to review the new entrant policy and formulate new policy framework for new entrants in the motorcycle sector for which EDB shall develop the Terms of References (ToRs) which will finalise it recommendations within 15 days after issuance of the notification.
New entrant policy for motorcycles sector was not included in AIDP (2007-2012). New entrant policy for motorcycle of 100cc and above was notified by FBR vide SRO 09(I)/2013 on January 4, 2013 to encourage new investment and technology in this sub-sector.
As per decision of the ECC of the Cabinet the tariff structure for motorcycle sector was defined as under which is applicable across the board and are subject to review after one year.
The tariff rates have been notified by FBR by amending relevant SROs.
Raw materials, 0 percent duty; sub components/ components 7.5 percent duty; sub-assemblies, 15 percent duty; CBU (all engine capacities), 57.5 percent duty; CKD kits not manufactured locally, 10 percent duty and CKD kits manufactured locally, 38.75 percent duty.
The policy for new entrants was notified by FBR vide notification No SRO 09(1)/2013 dated 4th January 2013 stating that in line with summary on "Policy for New Entrants" submitted by Ministry of Commerce approved by the ECC of the Cabinet case No ECC-135/14/2012 dated 23rd October 2012 which specifies that the additional customs duty leviable under this notification shall not be charged on sub-components and components imported in any kit form by a manufacturer declared to be a new entrant approved by the new entrant committee comprising representatives of Ministry of Industry, Ministry of Commerce and Board of Investment for the motorcycles of 100cc and above with new technology for a period of five years from start of commercial production subject to following major conditions.
At the start of commercial production by new entrants, localisation level shall be kept at a minimum of 25 percent. By the end of five years, localisation level shall reach a minimum of 85 percent.
The new entrant committee shall be chaired by Secretary Industries comprising representatives of Board of Investment and Ministry of Commerce that shall receive and approve requests of new entrants in motorcycle sector and extension of benefits under new entrant policy. The committee shall also be empowered to decide on proposals relating to introduction of new technologies by the existing manufacturers as well as the localisation plan.
The agreement template for new entrants, including the localisation plan, will be developed by EDB in consultation with the National Tariff Commission (NTC). The agreement would be designed in such a way that new entrant scheme is not misused.
New entrant would mean a potential assembler/manufacturer, whether local or foreign, bringing in new technology for the first time in Pakistan and have had no assembly/manufacturing of similar motorcycles in Pakistan in the past. Any existing player bringing in new technology would be eligible for tariff incentives to the extent of parts and components to new technology. [/I]