ISLAMABAD, Jan 18: The Economic Coordination Committee (ECC) of the cabinet on Tuesday approved a reduction in duties and taxes on ship-breaking industry and introduced a new 'no duty-no drawback' regime for the procurement of cotton by major exporters.

Special Secretary of the Prime Minister Secretariat, Dr Waqar Masud told reporters that the ECC, presided over by Prime Minister Shaukat Aziz, also approved a free trade agreement (FTA) with Sri Lanka which would be formally signed during the forthcoming visit of the Lankan president to Islamabad.

He said the meeting reduced duty on value addition benchmark from 14 per cent to five per cent and lowered the deemed price of breakable ships from $400 to $300 million that would have a cumulative net duty reduction of Rs1,333 per ton.

The special secretary said the decision was taken on the recommendations of the ministry of industries and production and the Central Board of Revenue to revive the ship-breaking industry in Balochistan and give a new impetus to this sector, which had been affected by non-availability of breakable ships and rising prices of scrap.

Mr Masud said the ECC also approved a new NDND (no duty-no drawback) regime for textile exporters to enable the mills to procure cotton without any sales tax and hence without any drawback or refund claims. But this facility will be available initially to 200 main textile units known as 'gold category exporters' who capture 75 per cent of the exportable surplus and they would be required to export 75pc of their production.

He said the decision would have no revenue impact because the normal sales tax applicable on the procurement of cotton from ginneries was paid back to the exporters as refund after export but they used to wait for refund for a long time. It will simply improve liquidity position of the exporters. He said the decision has met a long-standing demand of textile exporters.

Mr Masud said that all differences with the Sri Lankan government regarding the FTA had been resolved which had been hampering the formal coming into effect of the agreement for more than two years.

He said the FTA would be formally signed during the visit of Sri Lankan president to Islamabad and this would be Pakistan's first bilateral FTA with any country.

The secretary said the meeting did not take a decision on restructuring, unbundling and privatization of two gas utilities - Sui Southern Gas Company Limited and Sui Northern Gas Company Limited. The matter would be reconsidered later, he added.