ECC approves five-year auto policy, Rs5bn guarantee to PIA

The Economic Coordination Committee (ECC) of the Cabinet approved Automotive Development Policy 2016-21 that offers incentives to new manufacturers through lower tax rates to bring vehicle prices down through competition with existing players.

The meeting, presided over by Finance Minister Ishaq Dar, also increased sovereign guarantees to Pakistan International Airlines (PIA) by Rs5 billion, imposed regulatory duties on steel and iron products and extended deadlines for regasified liquefied natural gas (RLNG)-based large power projects in Punjab.

Board of Investment (BoI) Chairman Miftah Ismail told Dawn after the meeting that basic policy objective was to bring in new brands and revive some closed units to generate healthy competition in the market, leading to reduction in prices and improvement in quality standards.

He said the existing players were running with 20-year-old models despite government encouragement to roll out new models and reduce prices. "The existing three have not been able to bring in enough competition. As a result, car prices in Pakistan are much higher than they should be."

The policy defined new entrants as carmakers whose models are not produced in Pakistan at present and would set up greenfield projects, he said. This would mean that Honda, Toyota and Suzuki would not be offered incentive facility which the government would provide to new players like Fiat, Volkswagen, Renault and Nissan. Mr Ismail said new entrants would be allowed import of plants not produced locally at 10 per cent duty and 25pc duty on localised plants for five years. These rates would remain unchanged for five years.

Simultaneously, a brownfield category has been created for plants like Ghandhara-Nissan and some others which are currently lying closed for various reasons.