IORC costing billions’ loss?


The unnatural and illegal system of “IORC” in automobile industry is depriving the government of Rs 50 to 70 billion in terms of tax revenue each year.

According to informed sources the corruption and maladministration in issuance of “Production Certificate” and “IORC” by EDB has created a mess among Motorcycle Assemblers. This is badly affecting not only the sales and manufacture of bikes but export of the commodity that is detrimental for already depleting reserves of foreign exchange in the country.

The industry sources said that “Production Certificate” is issued by Engineering Development Board when any assembler or vendor submits its previous year’s import input record and the production of vehicles/ items during the year. Then EDB issues a “Production Certificate” to allow import quota of parts/ raw materials for the next year production. After obtaining this certificate an assembler or vendor is permitted to import certain parts or raw material on payment of 10 percent to 38.75 percent custom duty.

On the other hand, IORC (Input Output Ratio Certificate) is also issued by EDB on completion of the same formalities as stated above; but the difference between a “Production Certificate” and “IORC” is that after obtaining IORC an assembler or vendor is permitted to import certain parts or raw materials on zero percent, 5 percent and 10 percent custom duty as mentioned in the SRO-655/2006.

Since the “IORC” is a source of saving huge amounts from custom duties and other levies on import of same items as allowed under the “Production Certificate”, therefore, it is a major tool of corruption and misappropriation in the hands of the EDB authorities, who are selling it for at least rupees one million each for every single part or raw material imported under this concessional facility.

The sources disclosed that this system is mother of all ills in the automobile industry under which tycoons of the industry are buying IORCs on very large scale and enjoying duty free imports, while SMEs are suffering from the higher rate of duties under the tariff of “Production Certificate”. An average number of 750 IORCs are issued each year by EDB officials for import of various parts and raw materials by OEMs and vendors thus minting about Rs750 million per annum.

Sources further disclosed that under this facility M/s Atlas Honda, Indus Motors and Pak Suzuki were importing large number of containers each month full of various parts and raw materials enjoying zero rate of duty and selling most of the items in open market to earn huge profits and damaging the national kitty.

According to one estimate, only this policy of corruption was incurring a huge loss of revenue approximately 50 to 70 billion rupees per annum to national exchequer, the sources added.

-Published on page#19, December-2013 edition of MOBILE WORLD Magazine