LAHORE, Feb 9: The Ministry of Commerce (MoC) is said to be working on a proposition to enhance duty drawback on export of polyester yarn and fabric to Rs9.50/kg from the existing Rs5.40.
The commitment to allow additional duty drawback came from the commerce minister, Abdul Razak Dawood, during a meeting with the polyester yarn and fabric exporters towards the end of last month as they complain that it is “becoming more and more difficult for them to compete in the world market due to higher prices of local polyester fibre than the imported raw material.”
“The minister agreed in principle to allow additional drawback on export of textile products using polyester as raw materials in order to correct the anomaly caused by 25 per cent protection for local polyester fibre manufacturers,” Punjab Aptma chairman Anjum Salim told Dawn here on Saturday.
He said the “imported manmade fibre was cheaper than the local fibre by Rs4/kg despite 25 per cent import duty.” While the local fibre costs the industry Rs51/kg, the price of the imported fibre is still available to it at Rs47-48/kg, says Aptma.
“The anomaly is caused by the sovereign guarantee given by the government to the ICI’s PTA plant,” Aptma officials say.
According to the Punjab Aptma chairman, a decision on allowing additional duty drawback to polyester yarn and fabric exports was probably being delayed due to the “hitches created by the Central Board of Revenue (CBR).”
The annual local polyester fibre production capacity is stated to be 350,000 tons by five manufacturers that is expected to rise to 500,000 tons shortly. Moreover, the spinners also import about 40,000-50,000 tons of manmade fibres, including polyester.
The Aptma officials claim that the local producers “acted like a cartel” and slash their prices when the textile industry begins importing manmade fibre at the cheaper international prices. They pointed out that the “polyester fibre producers had reduced their rates by Rs9 a kg to Rs51 in three stages since December when the industry began importing it.” The rate was reduced to Rs57/kg in Dec, to Rs54 on Jan 4, and to Rs51 on Jan 18.
“This reflects the margins the local polyester fibre producers are reaping due to the protective duty on import,” said the Aptma officials.
The situation “suited” the polyester yarn and fabric exporters until June 30, 2001, when the government allowed duty drawback to spinners and weavers on polyester fibre “irrespective of the fact whether they used local or imported fibre.” Import under no duty, no drawback was also allowed till then. But the situation changed after the government decided to withdraw duty drawback in phases, introducing the Duty and Tax Remission on Export scheme. However, polyester fibre was excluded from the scheme since the government felt that it would “violate the sovereign guarantee” given to the ICI.
In the meantime, duty drawback on export of polyester yarn and fabric was also brought down to Rs5.40/kg in September, rendering export expensive in the international markets. Further reduction, however, in the duty drawback rates was suspended due to the Sept 11 terror attacks on the US soil and the events following them as the new situation hit Pakistan’s exports hard.
Aptma contends that making export of polyester yarn and fabric “zero-rated” and genuine drawback did not “violate” the sovereign guarantee.
