ISLAMABAD (Kashmir English): In a significant move, the federal government is redesigning tariffs in the auto sector as part of the National Tariff Policy (NTP) that could dramatically cut down the prices of cars, jeeps, and other parts.
Commerce Secretary Jawad Paul told the National Assembly Standing Committee on Finance that fully executing the tariff reforms might cut customs duties on cars, jeeps, and auto parts by as much as 25-50% and cut the maximum overall tariff from approximately 156% to nearly 74%.
‘The auto industry has operated under the blanket of huge protection through high tariffs for decades now,’ Jawad said.
The reforms under NTP are planned to make vehicles cheap in the country, through reduced duties on imports, while at the same time introducing competition for the local car makers.
The Commerce Secretary said the tariff roadmap under the second year of NTPs will see duties go down on thousands of tariff lines. ‘With each passing year, the NTP seeks to move towards a simpler tariff structure with lesser customs duties and lower barriers,’ he added.
The rationalisation of tariffs for the auto sector will likely bring down government revenue to the tune of Rs. 143.4 billion as the rates of regulatory charges and duties are brought down.
However, while consumers look at this reform as a positive step towards affordable cars, it is also perceived to pose a new challenge to the local assemblers from the imported ones in the country’s upcoming auto policy.
The proposed auto policy reforms also align with the government’s broader commitments under the IMF-supported program, where it agreed to cut down on overprotection in the automobile sector and lower barriers gradually.
But differences within the government ranks over the reform pace caused a delay in the finalization of policy. The IMF is pressurising the government to further liberalise the auto sector by putting the proposed measures under strict review; However, final decisions have not been made yet as the government plans the finalization in conjunction with the expiration of the current auto policy on June 30.
