EDB demolishing Automotive Industry


-Nasir Mahmood

[dropcap]T[/dropcap]he Original Equipment Manufacturers (OEM) of automobile industry have slammed the attitude of the officials in Engineering Development Board (EDB) for their baseless and non-serious directives issued just to harass and discourage small manufacturers and traders in the country.

Citing the example they referred to a latest letter dated 21st June 2013 issued by a DGM/Incharge (Tariff) threatening about a hundred OEMs of vehicles for not revalidating their Manufacturing Certificate & lists of importable inputs for the Fiscal Year 2013-14.

The DGM in his above-referred letter stated that OEMs of vehicles, who avail the concessionary regime of SRO 656(I)/2006 for the assembly/manufacture of vehicles are liable to follow all the conditions of the aforesaid SRO. As per conditions of the SRO, it is mandatory for the OEMs to make direct import of CKD components duly approved by EDB under condition (iii) of the SRO or procure them from the sales tax registered local vendors, manufacturing such components. As such, for the legal assembly of vehicles, procurement of components is allowed either through direct imports and its release through PRAL’s OCS or procurement from the local sales tax registered vendors, as mentioned above.

According to DGM, as per condition (xii) of the SRO, in case of violation of any of the condition of the SRO, EDB may suspend or not revalidate certificate for assembly of vehicles & list of importable components. It is therefore, obligatory for the OEMs to operate within the parameters of the said notification as non-compliance to it attracts proceedings under the law.

The DGM further said, it has been observed that majority of OEMs, after enrolling under SRO 656(I)/2006 and obtaining Manufacturing Certificate and list of importable components, resort to procuring their parts/components from commercial importers/traders instead of direct imports. This mis-procurement leads to illegal assembly of vehicles, results in sub-standard production of vehicles and above all creates an uneven playing field for genuine players. Most importantly, firms engaged in such unscrupulous illegal procurement activity are putting a colossal dent on national exchequer through evasion of duties & taxes, the letter added.

Commenting on DGM’s letter a spokesman of the OEMs disclosed that the above-said condition stated by the DGM EDB was not mentioned in the original SRO. The bureaucracy of the Ministry has inserted many dodgy amendments during last nine years just to harass the industry investors. He said the industry members have asked; what is the purpose of issuing this letter just nine days before when the current fiscal year was already ending on 30th June?

In addition to this, the spokesman inquired why EDB wishes to compel each and every manufacturer to directly import the parts/components from abroad whether such import is feasible or not. This is the discretion of an investor/manufacturer; according to market economy to decide either he should import any item or procure it from commercial importer/traders. Duties and sales tax are also paid on imports made by commercial importers/traders therefore this is a false and misguiding statement by DGM, EDB that such procurements are putting a colossal dent on national exchequer through evasion of duties & taxes.

He further stated that there could be many reasons behind local procurement; for example some importers have stock of parts/components imported one year ago when dollar-rupee parity was different from today, ultimately his cost and price would be lower compared to placing order for new imports. Therefore, a manufacturer would definitely prefer a local buying while he knows that direct import may become more costly and also take three to four month time for arrival of shipment, which is another cost escalation factor. Thus with such type of interference the EDB is doing nothing good for Automotive Industry in the country, instead it is trying to demolished the industrial base, the spokesperson added.

-Published on page#10 in June-2013 edition of MOBILE WORLD Magazine