ISLAMABAD, Aug 19: The commerce ministry has suspended freight subsidy on exports after unearthing massive misuse of the facility by a few exporters. Official figures made available to Dawn showed the Export Promotion Bureau (EPB) paid out Rs801.8 million as freight subsidy on export of around 11 products mainly in 2004-05. However, the details of the previous two fiscal years 2002-03, 2003-04 were not available, but it is anticipated that they too would have been more or less misused in the same fashion.

According to a presentation on impact of freight subsidy on export, a copy of which was available with Dawn showed unusually high freight rates compared with FoB value of goods and few companies claiming high percentage of the total freight subsidy.

The report further showed apprehension of mis-declaration of H.S nos from ineligible to eligible products; auditors-exporters-freight forwarders nexus, as auditors are only answerable to the chairman EPB; re-routing of shipments from ineligible to eligible countries and connivance with freight forwarders for freight enhancement.

The government had started freight subsidy scheme from July 1, 2002 for export of new markets and new products. The new products would be considered those whose annual exports were not more than $5 million in any one of the last three years while new market would be termed those where Pakistan’s average exports were not more than $10 million in the last three years.

Contrary to these broad-based parameters, the major portion of the subsidy amounting to Rs619.8 million was just provided on export of rice, meat, vegetables/fruits, seafood, textiles during the year under review.

While the most alarming misuse of the facility was that in 38.4 per cent of the total claims for freight subsidy in 2004-05, the amount of freight subsidy was more than the price of the goods exported during the year under review. This showed that how it could be possible that freight cost was higher than the actual cost of the products.

This is an area, which needed an extensive investigation to determine the actual reasons for payment of high subsidy than the cost of the products to exporters.

The analysis further revealed that top eight companies exported rice and claimed 65 per cent of the total subsidy. Moreover, top 30 companies were paid 82 per cent of total freight subsidy.

The EPB paid Rs538.3 million as freight subsidy on export of rice as against 194 claims received from 10 rice companies. Of these Rs200.1 million was paid to Hassan Ali Rice Export Co as against their 29 claims in 2004-05.

Similarly, an amount of Rs41.8 million was paid as subsidy on export of meat to around six meat exporting companies as against 2,141 claims in 2004-05.

With this facility, the export of meat has reached to around Rs60 billion during the year under review, which has not only created shortage in the domestic market but also pushed the price of the commodity sharply higher.

While on the other hand, government allowed duty-free import of meat and animal from India, which would not only result in loss to the foreign exchange reserves but would also deprive the national kitty of due taxes.

The EPB paid Rs19.6 million as freight subsidy on export of vegetables and fruits; Rs8.9 million on seafood export and Rs11.2 million on export of textiles by Nishat Mills Ltd; Rs14.9 million on export of coke/coal by Global Commodities; Rs5.67 million on export of cement by one Attock Cement Pakistan Ltd; Rs4.9 million on export of polystyrene by Pak Petrochemical Ind (Pvt) Ltd; Rs4.2 million on export of chemicals by Nimbus International; Rs3.9 million on pharmaceuticals by Royal Group; Rs3.8 million on sack/ bags by Kashmir Polytex Ltd.