KARACHI: The government is likely to impose one per cent customs duty on raw materials that are being imported at zero duty in the budget 2015-16.

Sources in the industrial sector said that the government officials had continuously been hinting at imposition of 1pc duty in various pre-budget meetings held with the stakeholders.

“Imposition of duty on zero-rated raw materials will generate huge revenue for the government as substantial number of critical industrial materials are being imported at zero duty,” the sources said.

The zero duty was in line with the national policy of import substitution to promote industrialisation.

Under immense pressure from the international lending agencies to generate revenue the government seems to be moving away from the national long-term policy objectives.

The move is indicated to provide short-term hike in revenue generation, but in the longer run imports are sure to increase as local manufacturing will become expensive vis-à-vis imports.

At that stage the country will feel pressure of foreign exchange moving out. “Unfortunately, there are no short-term solutions to import substitution,” one of the sources said. “Process of industrialisation once reversed will take decades to get corrected,” he added.

The one per cent duty means that the cost of production would certainly go up and its impact may be passed on to the end consumers.

Published in Dawn, May 3rd, 2015

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