Automark

At last long awaited ‘Automobile Development Policy 2016-21 is announced. It will certainly pave the way for new international vehicles manufacturers to enter in the Pakistani market. This will create a healthy environment of competition in the local industry.

The new automobile policy will offer tax incentives to new entrants in order to help them to establish manufacturing units in Pakistan and effectively compete with the existing three assemblers, who are operating since the early 90s.

A major incentive for the new investors is reduced 10% customs duty on non-localized parts for five years against the current 32.5%. For investors, the duty will be slashed by 2.5% to just 30% from the new fiscal year of 2016-17.

Beginning from July, the localized parts can be imported by the new entrants at 25% duty compared to the current 50% for five years. A single duty rate will be applied to the localized and non-localized parts after five years of the new policy. The present duty structure will continue for seven years for the new investors. For existing players, the duty on import of localized parts will be brought down to 45% from the new fiscal year.

The government has allowed one-off duty-free import of plant and machinery for setting up an assembly and manufacturing facility. It has also permitted import of 100 vehicles of the same variants in the form of completely built units (CBUs) at 50% of the prevailing duty for test marketing after the groundbreaking of the project. This is called green field project. The definition of new investor has again been changed to deny certain benefits to the existing auto players.

Greenfield is now defined as “installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of make not already being manufactured in Pakistan.” For the revival of sick or non-operational units, the non-localized parts can be imported at 10% and localized parts at 25% duty for three years. This is called Brownfield project. The government has included the word ‘make’ and deleted the word ‘assembled’. It has defined ‘make’ as “any vehicle of whatever variant produced by the same manufacturer.”

The present stakeholders in the Pakistan automotive industry are not happy with the new policy. Pak Suzuki, the largest car maker in terms of market share, calls the policy a “disaster”. A spokesperson for Pak Suzuki, said that “The government is requesting auto companies to come and invest in Pakistan. On the other hand, it is not giving equal incentives to the existing players who are ready to invest billions of rupees.”

Two key players in the automobile industry – Indus Motor and Pak Suzuki Motor Company – have challenged some clauses of the new auto policy and got a stay order from the Sindh High Court against its implementation, indicating they are not immediately inclined towards offering technologically improved and cheaper vehicles. According to the new auto policy, Indus Motor was to install immobilizers in its XLI (basic) variants, Suzuki in Cultus and Mehran models and Honda Atlas Cars in the City variant. However, the carmakers have refused to install the immobilizers immediately, arguing it is not possible for them to complete the task in a short time. They require six months to one year as vehicle engines need to be changed for putting in place the anti-theft device.

An effective auto policy should do two things for a country; increase employment and industry by increasing the manufacturing sector, and of course, allowing for increasing sales and increasing the volume of cars bought by the public, which ideally should be cheaper and of better quality.  The local plants of Japanese companies such as Toyota Honda and Suzuki do their part in employing a sizable workforce, but a large part of the current demand for automobiles rests on the shoulders of the second-hand import dealership business, which is not labor-intensive. The government resisted changes to the import of used cars to Pakistan. Additionally, the government has offered new entrants duty-free import of their entire plant and machinery among other benefits.

At the end of the day, it is important to remember that more cars do not solve the problem of transportation across the country. Rural areas still have a very limited number of private cars present, and of course the average citizen cannot even afford any form of personal transport. Looking beyond city centers, one can see that Pakistan’s infrastructure is still not completely ready to take on a sudden influx of thousands of new cars that might be injected into the market if the pricing policy of the new entrants is competitive. While the regime looks to invite new manufacturers, the interest displayed by the companies themselves can be termed lukewarm at best. While a lot of demands have been heard and catered to, important issues such as setting the definition for a medium-knocked down unit have been left out of the policy. With the policy in place, the time has arrived for the government to consider practical issues, and ensure that as promised, new competition not only enters the market, but gives a fight to the old established players.

New auto policy do not focus on technology transfer. In my point of view some special incentives should be offered for technology transfer. It may be noted that still auto industry of Pakistan is restricted to the assembly work. Not a single company is producing the components of the following critical and functional parts.

1. Engine
2. Transmission
3. Gear Box
4. Axles
5. Ignition System
6. Clutch System
7. Braking System
8. Motors etc
9. Wind Serene & Door Glasses

Japanese companies are working in Pakistan since 90’s but they are doing only welding, painting and assembly. Now it is the time that some of the above mentioned component manufacturing should start in Pakistan whatever the facilitation and incentive required should be provided through new auto policy, even to the old players, for real technology transfers specially for the local assembly and manufacturing of the above mentioned components.

Exclusive written by Anwar Iqbal for Monthly AutoMark Magazine, published in September-2016 printed edition

Pakistan never had a natural gas surplus to the extent that Pakistan decided to adopt an energy policy that made natural gas as the prime energy source feeding into five highly critical sectors of national economy. Secondly the myth why the pricing of this precious indigenous resource was not based on the principle of scarcity and optimal utilization baffle experts. It was severely over allocated, underpriced and excessively misused. The apparent public private partnership as prevalent in the natural gas sector turns out to be a multilayered façade that cover up for the monopolistic control of the Ministry of Petroleum.
The oligarchic control of all aspects of the sector ranged from appointments and placements, exploration & production licensing, distribution & transmission, tariff and price determination etc. The gravity of the mismanagement can be realized through the fact that the overall economy slowed down (stagnation). This poor governance of natural gas and power sector has now entered into stagflation, which is the worst-ever experienced by Pakistan.
The Ministry of Petroleum & Natural Resources along with All Pakistan CNG Association has decided to sell the CNG in liters instead of Kilos. It is important to know that why it has happened and why the OGRA has termed this sale is illegal.
The Liquefied Natural Gas (LNG) deal with Qatar is being widely described as one of the biggest scams of the Nawaz Sharif government mainly because of lack of transparency. The billions of dollars deal has been struck with Qatar. LNG is being supplied to the power sector, to fertilizer sector and to CNG sector. It is interesting to mention that the present government is in hurry to conclude all national & international agreements in which all ministries has to obtain formal approvals from federal cabinet and/or Economic Coordination Committee (ECC) of the Cabinet prior to finalization of any deal. It all started by the petroleum ministry through Inter-State Gas Systems (ISGS) who’s MD Mubeen Saulat is now under active investigation by NAB for illegal award of LNG terminal contract to Engro, which is owned by Seith Dawood who is an underhand partner of the so-called rulers of Pakistan.
What is Liquefied Natural Gas (LNG) Basics
Compressed natural gas is often confused with LNG (liquefied natural gas). While both are stored forms of natural gas, the key difference is that CNG is gas that is stored (as a gas) at high pressure, while LNG is stored at very low temperature, becoming liquid in the process. CNG has a lower cost of production and storage compared to LNG as it does not require an expensive cooling process and cryogenic tanks. CNG requires a much larger volume to store the same mass of gasoline or petrol and the use of very high pressures (3000 to 4000 psi, or 205 to 275 bar).
LNG is principally used for transporting natural gas to markets, where it is re-gasified and distributed as pipeline natural gas. It can be used in natural gas vehicles, although it is more common to design vehicles to use compressed natural gas. It’s relatively high cost of production and the need to store it in expensive cryogenic tanks which have prevented its widespread use in commercial applications. LNG is produced by taking natural gas from a production field, removing impurities and liquefying the natural gas. In the liquefaction process, the gas is cooled to a temperature of 2600 F at ambient pressure. This condensed liquid form of natural gas takes up about 1/600th of the volume of natural gas at a stove burner tip. The LNG is loaded onto double-hulled ships which are used for both safety and insulating purposes. Once the ship arrives at the receiving port, the LNG is typically off-loaded into well-insulated storage tanks. Re-gasification is used to convert the LNG back into its gas form, which enters the domestic pipeline distribution system and is ultimately delivered to the end-user in our case the LNG is being enter in SSGC distribution system.

In the recent statement the Oil and Gas Regulatory Authority (OGRA) has termed the sale of compressed natural gas (CNG) in liters as illegal. The OGRA orator announced that “The imported gas Re-gasified Liquefied Natural Gas (RLNG) is de-regulated and authority does not regulate its pricing. Actually, both the provinces are using the mixture of RNLG & CNG gases as they are being entered into SSGC distribution system. Elaborating that, “the natural gas is produced indigenously & regulated so its price must be determined by the authority.” In Sindh province, the sector is using the same mixed gas and Sindh Association has revert back the sale of gas in Kilos after direct intervention of OGRA Authority but Punjab is still selling CNG in liters. Taking cognizance of CNG Association’s Punjab decision to sell CNG in liters instead of kilos is illegal.
The OGRA has already communicated to the All Pakistan CNG Association that the maximum sale price of CNG as on 31-08-2015 is Rs 75.82 per kg for Khyber Pakhtunkhwa, Baluchistan and Potohar region and Rs 67.50 per kg for Sindh and Punjab and it is legally prevalent for all indigenous gas based CNG stations. Any CNG Station charging other than the OGRA notified rates is violating law and action shall be taken against violators as per law. The OGRA has referred notification which had been issued under the relevant law and in pursuance of the decisions of Economic Coordination Committee of the Cabinet (ECC). “Therefore, all the CNG stations are legally obligated to sell (local gas-based) CNG in kilograms and not in liters.”
In this regard, OGRA has also advised the CNG Association to come up with proposals for authority’s consideration as per law and in accordance with policy of the government. Moreover, Consumers are skeptical over the new CNG pricing. They told this scribe that they are worried over the hike in CNG prices according to the new pricing system.

Written by Asif Masood, published in Monthly AutoMark Magazine’s September-2016 printed edition

The Director General Customs Valuation has issued new custom values on August 25, 2016 after three years for import of motorcycle helmets ranging between $2.60 to $9.60 per piece of Chinese and other countries origin based on the prevailing prices in world markets.

Customs values for bike helmets (half and full face and cross shaped) specified shall be assessed to duty/taxes of above customs values.

The department claims to have initiated an exercise for determining customs values for bike helmets and meetings in this regards were held with stakeholders August 16 and August 25. The stakeholders were asked to submit various documents before the meeting which included invoices of imports made during the last three months showing factual value, website emails and addresses of known foreign manufacturers of the item to ascertain current value, copies of contracts made/LCs opened during the last three months showing value of the items and copies of sales tax invoices issued during the last four months showing the difference in price (excluding duty and taxes) to substantiate that the benefit of difference in price is passed to the local buyers.

However, the Director General did not receive any documents and not even after the said scheduled meetings.

The Customs said valuation methods given in Section 25 of the Customs Act 1969 were followed. Transactions value method provided in Section 25 (I) was found inapplicable because the requisite information was not available. Identical/ similar goods value methods provided in Section 25 (5) and (6) were also not found helpful in determination of values due to wide variation in values. Consequently market enquiries as envisaged under Section 25(7) of the Customs Act 1969, were conducted and customs values of bike helmets were determined under Section (7) of the Customs Act 1969.

In cases where declared transactions values are higher than the customs values determined in this ruling, the assessing officers shall apply those values in terms of Sub Section (i) of Section 25 of the Customs Act 1969. In case of consignments imported by air, the assessing officers shall take into account the differential between air freight and sea freight while applying the customs values determined in the ruling.

The values determined in the ruling shall be the applicable customs value for assessment of subject imported goods until and unless it is rescinded or revised by the competent authority.

A revision petition may be filed against the ruling within 30 days from the date of issue of the ruling.

Market sources said that previous ruling on full face helmet of China was $2.53 per piece while valuation of half face helmet was $2.23.

They said the import duty on helmet ranges between 16-20 per cent, additional customs duty of one per cent, 17 per cent sales tax, additional three per cent sales tax and six to nine per cent income tax. Considering the valuation ruling of $2.80 of a Chinese helmet at 16pc ST, one per cent additional customs duty, three per cent additional sales tax and six per cent income tax, the cost of import for a helmet comes to Rs 440. On the contrary, full face helmet of Chinese origin sells between Rs 800 to Rs 4,000 while half face helmet sells between Rs 750 to Rs 3,500. Some branded cross shape helmet is priced Rs 5,000.

Akbar Market, hub of helmet and bikes, also has Indian helmets with warranty of three years at a price ranging between Rs 3,000-5,000. Sub standard locally produced helmets are available at Rs 500.

On some FTA approved companies/importers, the rate of customs duty is five per cent.

Chairman Association of Pakistan Motorcycle Assemblers (APMA), Mohammad Sabir Shaikh said it is surprising that the market has Indian helmet and it is not clear whether these helmets are officially allowed or finding way through illegal channels.

He said it is also unclear whether imports of helmets from China at same of European standards or average quality is arriving into Pakistan.

He said customs department does not have any study regarding category of helmets arriving from China as certified helmets are already very costly in China starting from minimum $10 to $35 per piece and sub standard helmets are priced between $4 to $13 per piece.

The long awaited Automotive Development Plan is now announced previous month after a lapse of almost five years. The plan provides lucrative incentives for almost all segments of Automobiles which includes Passenger Cars, Light Commercial Vehicles, Buses, Trucks and Prime Movers. Two categories are developed for the investors in this Plan which includes Green Field Project and another one is Brown Field Project.

In Green Field Project the incentive is given mainly to the new investors in Passenger Cars segments with strict condition of introduction of new “MAKE” rather than new “MODEL”. According to this scheme only those investors who will invest in purchasing of land and development of infrastructure and will introduce only those MAKES which are not yet previously assembled in Pakistan will be given incentives in the shape of imports of 100 units of CBUs of that particular Make at 50% of prevailing rate of custom duty, One time duty free imports of Plant Equipments and Machines and five years relaxation on imports of 100% CKD at the rate of 10% Custom Duty for Passenger Cars only and for three years for Buses, Trucks and Prime Movers only to import 100% CKD at prevailing rate of custom duty for non localize parts.

In Brown Field Scheme those assembly plants which are closed since 2013 are given a chance to re start their operations by importing 100% CKD at the rate of  prevailing rate of custom duty for non localize parts for three years for buses, trucks and Prime Movers only.

Pakistan is basically an agricultural country and our main source of food is Agriculture Farming. Tractors and agricultural equipments plays a major role in mechanized farming. Due to shortage of water resources, unstable input prices of agricultural seeds and fertilizers, lack of research and development and having no advisory services to farmers in Pakistan, the total land utilization could not be significantly increased. In 1991 it was 21.35MHa and till 2010-2011 it was 23.40MHa out of 79.61 MHa land, despite the fact that tractor population has been increased over the last 23 years, which is approximately 700,000 units today which according to experts should be more than One million.

The present per hectare horsepower (HP) availability in Pakistan is only 0.90 HP per hectare as opposed to 2.31 HP in India. The requirement of 1.4HP per hectare Pakistan is recommended by FAO which can be achieved through high volumes of tractor manufacturing industry.

In Pakistan there are six tractor assembly plants however only three are in production. The accumulated annual production of all three active units are around 45,000 to 50,000 where as the estimated demand of tractors are more than 70,000 tractors. To fulfill this Demand and Supply Gap, since last ten years imports of CBU were allowed at Zero rate of custom duty, however from the   fiscal budget 2014-15 15% custom duty and 10 percent Sales tax is imposed on CBU to support the local tractor industry which is now further reduce to only 5% in fiscal budget 2016-17.

Tractors are required by the Farmers, Construction Companies, and Land Developers.  Government of Pakistan is also working on large number of projects and requires large number of tractors.

An in-depth study of last twelve years local production and sales of tractors revealed that the industry is not able to meet the increasing demand of tractors while calculating AAGR the industry shown growth of only 2.16% over the last 12 years .There may be different reasons behind this shortfall  such as withdrawal of Government Green Tractor Schemes , failure of local parts supplies , old equipment’s, conventional type of production lines or other managing problems, therefore the Government is forced to allow imports of CBU tractors to meet the farmers demands.

Pakistan needs more tractor plants to support its farmers and to provide food to its people. Inspite of all these knowing facts ,in the coming new ADP 2016-21 this important sector is totally ignored no incentives in shape of Green or Brown Field is allowed to this important sectors the reasons for this ignorance best known to the high ups of BOI, EDB and other Government Sectors.

Pakistani people needs foods at affordable price not new Make of lucrative European cars, this important ignorance from a very important Government Ministry leaves many questions. Any one can go to the Pakistani Court and can quash this policy at any time similar to the tractor scheme announced in Gen Pervaiz Musharaf era which was totally quashed by the Sind High Court therefore the concern ministry should immediately review the announced policy and gives similar incentives to this important sector as given to New Passenger Cars.

This exclusive article published in Monthly AutoMark Magazine’s August-2016’s printed edition

by I.H.T. Farooqui, Advisor Monthly AutoMark Magazine and Chief Operating Officer at Karakoram Motors (pvt) Ltd., Karachi-Pakistan

Yamaha is working on the 2017 model of its popular middleweight sports bike YZF-R6; Likely to be introduced in a few months.

Yamaha is working on the 2017 model of its popular middleweight sports bike YZF-R6. Recently, some images of the next-gen model have surfaced on the internet that reveals some interesting details about this upcoming motorcycle. As seen in the images, the 2017 Yamaha YZF-R6 has its huge resemblance to its elder sibling R1. The front has been given the same hidden headlight treatment that is seen on the flagship Yamaha.

If some speculations are to be believed, Honda is planning to retire the R6 rival that is commonly known as the CBR 600RR. Yamaha might have thought to use the opportunity to the fullest for a simple reason. If Honda plans to discontinue the CBR 600RR, Yamaha will be benefitting huge from it and hence decided to bring the more appealing R6 in order to grab more market share of the respective segment.

Yamaha YZF-R6 was first introduced by the company back in 1998. Since then, the motorcycle has seen numerous development stage with the most recent one implemented in 2010 that involved some minor fixes in the power-train. Other than that, the motorcycle got its visual upgrade in 2008. Coming back to the leaked image, this upcoming Yamaha YZF-R6 will boast of almost the same design cues that are found on the new Yamaha R1.

Apart from the headlamp section, the bike will carry air vents on the fuel tank, large intake scoops and rear view mirror mounted clear lens turn indicators. Talking of power, the current generation R6 develops a peak power output of somewhere around 123 bhp. However, seeing the growing competitiveness, we believe that the company will launch the 2017 model with a slight bump in power figures. Stay tuned as we bring you more details on this upcoming Yamaha motorcycle!

In Pakistan, used car imports have been on a rise for more than five years in a row. In FY2016 alone more than 43,000 used cars were imported to Pakistan up from around 28,000 used car imports in FY2015. These imports have been made mostly by big dealers who also happen to have offices in Japan which purchase the car, initiate import and then sell them here in Pakistan. PakWheels.com provided comprehensive information about Used Car Importers in Pakistan; you can import your favorite car at PakWheels.com

So the question that pops in the head is: How can you import one by yourself?

Part 1: Selection

Step1: Used cars in Japan are mostly auctioned at auction houses which can be tracked online through various auction sites live. Your safest bet is to find an auction website and sign up.

Step2: Search for the car you are looking for. The search process is also similar to any other classifieds website.

Step3: Once you have found the car you want to import, look for its auction sheet which provides a concise grading for the car. Moreover, the page also mentions its auction date and auction house.

Part 2: Purchasing the car offshore

Step1: Now if you are genuinely interested in getting the car imported, you will need to deposit a refundable payment of around USD 1000 to the company’s account (this amount may vary depending on the company you use) this amount is refunded in case you do not win the auction of the car.

Step2: Once you make the payment, you will be granted access to bid on the cars available for auction online.

Step3: After you have placed the bid for your desired car, you will be intimated by your company on the auction date regarding results of the auction.

Step4: Now if you win the auction, your company would ask you to pay the difference between the upfront deposit and the winning auction price. In addition to this, you will be requested to pay for the C&F or Cost and Freight charges. C&F charges are less than 10% of your winning bid.

Note: If you didn’t win the auction you would need to repeat the steps listed before.

Part 3: Importing the car things to note!

1)    Once the payments have been confirmed, your company would send the original documents of your car via courier before car’s shipment

2)    After payment, the car is sent to the inspection office for a final review which can take up to five days

3)     Delivery takes around 15 days to reach Karachi Port

4)    A customs agent needs to be hired to handle the process of customs clearance along with the payment of passport fees and port charges.

By Adan Ali