Friday December 02, 2022

Automakers demand clarity on incentives for new entrants

February 10, 2021

LAHORE: Carmakers have asked the Engineering Development Board (EDB) to be specific about the cut off dates for availing incentives that Auto Development Policy (ADP) 2016-21 offers to the new entrants, an official said on Tuesday.

Pakistan Automotive Manufacturers Association (PAMA) demanded clarity on those dates in a letter to the EDB, dated February 8, 2021.

The official said apparently, in the light of the Auto Industry Development Committee’s (AIDC) 34th meeting’s minutes, the government seemed to give some favour to some player.

“Currently, one new entrant is selling and booking its vehicles without establishing a plant, while under the policy every new entrant is allowed to bring 100 CBUs for the product development and marketing,” the official said.

The 34th AIDC meeting minutes stated: “That the maximum incentive period is five years, in case of greenfield, and three years in case of brownfield, thus for those approved companies, which will start their commercial operations after June 30, 2021, the break-off dates (counted from the end date of the AOP i.e. June 30, 2021) shall be June 30, 2024 and June 3, 2026, respectively. The companies who have already started their commercial production before June 30, 2021, their incentive shall not go beyond their approved five-year business plan.”

“Those companies who have already started their commercial production before June 30, 2021, shall not be allowed to modify their business plan, unless it is covered in their agreement, without proper justification. As it may result in withdrawal of incentive as per clause 4.4 of the ADP 2016-21.”

The clause related with Withdrawal of Incentive stated “In case of material deviation from the approved commercial operation schedule, withdrawal of incentives shall take effect...”

The PAMA in its letter stated that, in this regard, the new entrants, already in production, shall be entitled to avail concession for five or three years, as the case may be, counted from the date of commercial production. “However, these new entrants, also, reportedly, submitting revised business plans for the new models.

This, submission of revised business plan, by those who have already attained commercial production, may circumvent the incentive period that may end up being more than five or three years,” it added.

“There is done deal once in commercial production, yet the submission of revised business plan may revive incentives that may, therefore, exceed the prescribed periods stated above,” it said.

The PAMA further said in the minutes of AIDC meeting it was stated that: "In that case new entrants can respond/submit application finalise plans by 30th April 2021”, which needed to be clarified.

“The PAMA assumes that the new entrants referred here are those who have not yet finalised their plans and have not yet in commercial production,” it said.

The PAMA also requested the EDB to give a detailed briefing in next AIDC meeting on the extent of incentives available to greenfield investors under the light of AIDP 2016-21 and relevant SROs & Notifications, while industry also wanted clarity on the dates of start and end of the period of five-year incentive.