THE auto sector is critical of the governments’ move to reduce tariff saying that it would be disastrous not only for the industry but also the whole economy.

Auto manufacturers have been lobbying against any changes in the existing tariff structures, while vendors are even actively opposing free trade with India.

A delegation of over two dozen auto assemblers and vendors attended a meeting with officials from the Planning commission, the Engineering Development Board (EDB) and its line ministry (the Ministry of Industries) last week.

“The government is making Pakistan a dumping ground for the cheap and maybe low quality parts coming from India and China,” said an office bearer of the Pakistan Automotive Parts and Manufacturers Association (Papam) addressing the media after the meeting.

This meeting, like many previous ones, was fruitless - although both sides would like to think that they had been able to convince the other. While all sides agree that an atmosphere of competition would eventually help the consumers and the auto sector, they differ over the modus operandi to introduce the competitive regime in the auto industry.

An auto sector plan, developed by the Engineering Development Board (EDB), was handed over to the industry for the first time.

Incidentally, it has not been recognised by the auto industry that there are no two sides in the discussions over the ‘Auto Industry Development Plan –II (AIDP-II).

The Planning Commission proposed sharp cuts in the tariff structures for the imports of motorcycles and its parts. It wants to lower the 65 per cent duties on import of Completely Built Units (CBU) to 35 per cent while for CKD units it suggested duties be brought down from 15 per cent to five per cent.

On the other hand, the EDB wants tariffs to be reduced gradually and the five year AIDP-II has suggested that tariff be brought down to 50 per cent for CBUs: from 47.5 per cent to 25 per cent for the locally manufactured parts and to five per cent for parts not being manufactured in the country.

Over the course of the meeting, auto manufacturers were vocal against the EDB, while much to their astonishment, the deputy chairman of the Planning Commission, Dr Nadeem ul Haq, asked the Ministry of Industries to prepare a short study to assess how much ordinary consumers would save if the auto industry was completely winded up.

The Planning Commission even criticised the ministry of industries for being too lenient on the auto sector and asked the ministry and the EDB why consumers and dealers were invited to open forum discussions related to auto policy or even pricing of vehicles. The ministry of industries is putting pressure on the EDB to standardise codes for the auto sector as currently there are no set quality standards for the cars in the country and all the manufacturers are making cars according to standards established by their respective companies.

Currently, the Pakistan Standards and Quality Control Authority (PSQCA) is the body that checks the quality of parts being used in motorcycles being manufactured or assembled in the country.

The AIDP-II is expected to be approved in the budget 2012-13 but there is strong pressure on all the players to produce more and better models of both two wheelers and cars within the country- a fact that is highlighted when we find out that 40,000 cars are to be imported during this fiscal year.