Paapam demands withdrawal of regulatory duty on industrial steel

LAHORE: The government has been urged to withdraw regulatory duty on import of industrial steel materials by the auto parts industry, as these materials are not manufactured in Pakistan.

Pakistan Association of Parts and Accessories Manufacturers (Paapam) Chairman Mumshad Ali asked the Prime Minister of Pakistan to withdraw the duty while chairing a meeting of the Managing Committee of the Association on Tuesday.

He said that an Auto Development Plan (ADP) has already been approved by the ECC on March 21, 2016, which lays down a five year tariff structure for the auto parts industry. 

The FBR is unjustified in modifying this new policy’s tariff structure through interventions like levies of regulatory duty, etc. The last such intervention was SRO 236(I)/2016, dated March 21, 2016,  immediately after announcement of the ADP, which further levied an RD of up to 15 percent on various metal products in addition to the RD levied earlier through SRO 568(I)/2014 back on June 26, 2014.

To date the FBR has not rectified the earlier anomaly and this additional RD after the announcement of ADP 2016-21 amounts to insult to injury.

The chairman said these interventions were made for the protection of the local steel industry which mainly produces constructional steel. However, the affected PCT codes were common for raw materials allowed to be imported by the auto parts industry at concessionary duty, because these materials were not produced by the local steel industry which is protected through the levy of RD.

This fact has also been duly recognised in the new ADP document, and no regulatory duty has been levied on raw materials imported by the auto industry, provided they are not manufactured locally.

The managing committee asked the government to immediately withdraw all past and present interventions of RD on industrial steel not manufactured locally, by making necessary amendments in SRO 568(I)/2014.

They further stated that all the rules in this regard were clearly laid down in SRO 655(I)/2006 dated June 22, 2006, which has been part and parcel of the auto policy since 2006, and continues in the new ADP.

The previous auto policy and the current ADP have both been designed to encourage localisation, resulting in investments in the country, savings of foreign currency outflows, creating employment opportunities and contributing towards the economic growth.

While including the list of steel materials under SRO 568, the exemptions already available to the auto industry have been ignored, resulting in discouraging localisation, rendering them non-competitive and encouraging imports of auto parts previously manufactured locally.

Paapam recommended the government and the FBR that imports of materials by the auto industry under SRO 655(I)/2006 should be exempted from regulatory duty under SRO 568(I)/2014, as similar exemptions have also been granted to other industrial sectors covered under SRO 565, SRO 678(I)/2004, Fifth Schedule to the Customs Act, etc, through amendments in exemption clause of SRO 568.

If these RDs, additional RD's and custom duties were not withdrawn it would invariably lead to increase in the cost of production for APMs and increase in the price of the finished products ie trucks, buses, tractors, cars, three wheelers and motorcycles.