The government has abandoned the proposal to ban the import of CBU (complete built-up unit) vehicles, rather it has proposed to impose, for a limited time, the regulatory duty by up to 50 percent on the imports of electric vehicles, hybrid vehicles and normal gasoline vehicles with a view to containing and slicing down the increasing import bill.
“Under the WTO regime, the country cannot ban imports. However, it can increase the tariffs on imports to reduce the import bill, so we have decided to increase the tariff on import of vehicles in the country,” a senior official at the Ministry of Industries and Production told a media outlet.
“So much so, the increase in Federal Excise Duty (FED) up to 10 percent from the current 5 percent on vehicles being manufactured locally has also been proposed.”
The ministries of industries and commerce, the official said, would pitch proposals in the Tariff Policy Board for approval and once they get a nod, they will be placed before the prime minister for final say.
According to the official document about the new proposals, the relevant ministries have proposed the imposition of 50 percent regulatory duty on import of electric vehicles having over 50 KWH battery pack.
The Ministry of Industries and Production has justified the surge, saying due to a decrease in customs duty (CD) on electric vehicles in CBU condition from 25 percent to 10 percent, the import of high-end EVs is resulting in increase in the current account deficit. The purpose of electric vehicle policy is to promote local manufacturing whereas the import of high end EVs has increased due to reduction in customs duty. The ministry argues that this measure will discourage import of high end EVs in CBU condition.
The document also unfolds the proposal to increase the regulatory duty on import of hybrid vehicles (CBU) to 50 percent from existing 15 percent on 1501cc to 1800cc and help improve current account deficit. The ministry of industries says that this intervention will decrease the import of vehicles in the CBU condition. Likewise, the increase in regulatory duty up to 50 percent has also been proposed on import of normal gasoline vehicles in CBU condition.
The industries and production ministry also proposed the increase in the Federal Excise Duty on locally manufactured cars and Support Utility Vehicles (SUVs) from 1501cc and above, which will be enhanced to 10 percent from the existing five percent. According to the document, the ministry says that this step of increasing the FED on CKD manufacturing was proposed for a limited time in view of the current financial crunch.
However, the proposed increase in FED to 10 percent will damage the growth in the automobile sector in Pakistan and it will not be easy to bring the sector back on growth trajectory, said the officials who played an important role in alluring investment from abroad in the country’s automobile sector.
They said that in last year because of the Covid-19 pandemic, the cars production in the country remained at 96,000 and the production grew in the current year to more than double, between 250,000 and 275,000. But with an increase in tariff, the sector will go down and it will be hard for the government to uplift the growth in the automobile sector.