22 February 2004	Sunday	01 Muharram 1425

ISLAMABAD, Feb 21: The survival of industry in Pakistan against the avalanche of imports under commitments to the WTO and conditionalities of the IMF does not lie in tariff protection but in reducing energy cost , industrialists attending a public hearing on soda ash at the National Tariff Commission were told here on Saturday.

The hearing was held to consider the request by Olympia Chemical Limited that the 20 per cent duty on soda ash (now 10pc) be restored to save the local industry from imports allegedly rendered cheap by subsidies allowed by the exporting countries.

The representative of ICI, another major producer of soda ash, used in soaps, detergents, paper, glass, textile and some chemical industries, supported the applicant. But representatives of user industries - manufacturers of glass, paper, chemicals and dyes, were also present in force to oppose the move.

Dr Faizullah Khilji, chairman of the National Tariff Commission, referring to the contentions about higher cost of production in Pakistan, said the local industry would not be able to compete even with the most ideal tariff regime.

A major impediment was the energy cost - 30 per cent in case of soda ash as claimed by its producers. He advised the industrialists to approach the government with a well-prepared case for devising ways to bring down the utility rates, that are persistently on the rise in Pakistan.

It was his experience that the government did response whenever the industry persevered in putting across its views, he added.

Dr Khilji also pointed out that an industry could not remain in infancy forever. Protection is meaningful only if the industry has the capacity to endure after a reasonable period of time. As regards subsidies by other countries, he suggested anti-dumping proceedings by the affected industries.

Mian Mumtaz Abdullah, former chairman of the Corporate Law Authority, appearing on behalf of Olympia contended that the cost of electricity had been increased from Rs2.79 to Rs5.41 per unit since 2001. The duty on soda ash had been drastically cut by half in the budget 2002-03 without any consideration for its impact on the local industry, he charged.

Mr Mohammad Sulaiman, a former senior official of the Central Board of Revenue, marshalled his rich insights based on his long experience in dealing with tariff issues in endorsing Olympia's request.

He pointed out that the United States and China continue to subsidize their industries. Even when they slashed their tariffs to zero, they resorted to non-tariff barriers as compensation. It was the policy of foreign exporters to offer unrealistically low prices with a view to forcing local industry to close down. Once the industry is closed down, the same exporters raise their prices.

He said his client wanted protection only for two years in order to allow it to carry out its expansion plan.

But the soda ash producers' case was punctured by the user industries that pointed out that the current rate (10pc) was levied by consensus in a meeting chaired by the industries secretary. The user industry had initially proposed a five per cent duty.

But the ICI representative had argued that unlike the US where soda ash was produced through natural process, in Pakistan it was manufactured synthetically. It was, therefore, a capital-intensive industry.

Muhammad Iqbal Sheikh, director, Gunj Glass Works, Sh Ghulam Ahmed, Brig Rab Nawaz and Ahmed Mansoor, on behalf of glass and paper industries, complained that throughout the 1990s, increase in price of soda ash was an annual feature. If it had remained static since 1998 it was thanks to imports, they contended.

Yet, soda ash was one of the main ingredients of their industries and accounted for 80pc of cost of raw materials used in their production, they contended.

It was pointed out to them that subsidy could not be the only reason for the popularity of imported glassware. Other vital factors also came into play in ensuring better quality and lower cost. These included a conscious effort on the part of entrepreneurs to motivate the workers through above-subsistence wages which ensured quality of time for themselves and their children.

The NTC chairman asked these industries to provide data about their respective cost of production to enable it to formulate appropriate recommendation on the matter.