KARACHI, May 3: The Engineering Development Board (EDB) on Thursday stunned the entire auto sector as it proposed a drastic cut in duty in completely knocked kits (CKDs) and completely built-up (CBU) units.

The proposal has been rejected by the local stakeholders.

EDB chief executive officer Aitizaz Niazi presented a paper during a meeting with auto sector people and vendors in Islamabad on Thursday.

The presentation mainly focused on new auto industry development program (AIDP-II) for 2012-2013 to 2016-2017 as the current five year AIDP is expiring on June 30, 2012.

The EDB official also proposed duty structure under AIDP to be effective till year 2022.

Vendors stated that the proposed measures are bound to play havoc with the assembling and vendor industries. The proposals are aimed at abolishing protection to local industries, they said, adding that the proposed cut in tariff structure actually reflects that the Planning Commission had distorted view of the industry, rather than providing a road-map of progress for domestic players.

In the two-wheeler sector, the EDB proposed import duty on completely built-up units (CBU) units to 50 per cent in 2012-2013 from the present 65 per cent while duty on non-localised CKD is proposed to be slashed to five per cent from 15 per cent.

The duty on localised CKDs is proposed at 25 per cent in 2012-2013 from 47.5 per cent.

After making reduction in the subsequent fiscal years, the duty on parts that are produced would be brought to five per cent by 2017-2018.

The two wheeler industry had suggested the government to bring down the import duty on CKD kits to 10 per cent from 15 per cent and CBU rate to 55 per cent from 65 per cent.

In cars, duty on non-localised CKD kits is currently 32.5 per cent which the EDB proposed at 20 per cent while on localized parts import duty will be reduced to 35 from 50 per cent next year and after downward changes in every up-coming fiscal year, the duty will be brought down to 20 per cent by 2016-2017.

The rate of duty on CBU 1,000cc is suggested at 40 per cent from 50-55 per cent followed by 50 per cent on 1,000-1,500cc from 60 per cent in 2012-2013, while CBU duty on cars from 1,500cc to 2,000cc is proposed at 60 per cent from 75 per cent.

The reduction in CKD kits would result in decline in locally assembled cars and bikes prices.

The EDB road-map also includes withdrawal of regulatory duty of 50 per cent on cars exceeding 1,800cc being an impediment to growth in this segment.

However the biggest gainers will be the importers of Pajero, Land Cruisers, BMWs and Mercedes vehicles.

The customs duty on import of light commercial vehicles (five tons) is proposed to be brought down to 50 from 60 per cent while there is no plan to change the duty on CKD kits.

Federal Industries Minister Pervaiz Elahi tried to calm down the auto vendors and assemblers, saying the government would protect interests of the local industry before finalising any decision.

Pervaiz Elahi asked the Ministry of Industries and the EDB to start a consultative process with stakeholders.

He said another meeting with auto sector stakeholders would be held next week to listen to their point of view so that both the government and stakeholders could agree on a unanimous proposal.

The meeting was also attended by Federal Industries Minister Pervaiz Elahi, PAAPAM Chairman Syed Nabeel Hashmi, former chairman PAAPAM Amir Allawala, Millat Group chairman Sikandar Mustafa Khan, CEO Indus Motor Company Pervez Ghias and Secretary of Industries Aziz Ahmed Bilour.