ISLAMABAD / LAHORE: The Nawaz Sharif government on Saturday accepted two major demands of the spinners and weavers, agreeing to restrict import of cotton yarn, as well as grey and processed fabrics, by imposing a regulatory duty of 10 per cent to protect the domestic textile market from foreign competition.
The decision is likely to hurt the value-added (woven and knit) apparel exporters, who claim that the low-cost import of yarn and fabrics, especially from India, had helped them cut their costs and stay competitive in the international market.
The minister also agreed to reduce the rate of export refinance (ERF) by one per cent to 3.5 per cent in an attempt to support the country’s textile and clothing exports and extend the facility of subsidised long-term financing (LTF) to yarn producers and ginners to help them replace their aging technology and increase their production capacities.
Both decisions are likely to take effect next month.
India’s yarn is said to be available in Pakistan at a discount of 12-15 per cent.
The decision was made after marathon negotiations lasting over eight hours between the All Pakistan Textile Mills Association (Aptma) leadership and Ishaq Dar.
The finance minister had invited the Aptma leadership to Islamabad for talks on issues affecting the industry’s viability and international competitiveness after a one-day shutdown observed by the large-scale textile manufacturers early this week.
He also promised to speed up the payment of pending sales tax refunds as well as other refund of textile exporters and to set up committees comprising industry representatives and members of the Federal Board of Revenue (FBR).
But at the same time Ishaq Dar delayed decisions on other major demands of the Aptma, which represents the country’s wealthy and powerful spinners and weavers, like reduction in electricity and gas prices, cut in GIDC rate on gas supplies for captive power, and five per cent rebate to offset taxes on textile exporters.
The industry says the resolution of these issues is crucial for restoring the economic viability of the textile sector and to stem decline in exports.
FALLING EXPORTS: The country’s textile exports have been decreasing for the past two years, dropping by over 10 per cent during the last financial year and 14 per cent in the first quarter of the present fiscal to September in spite of duty-free access to the 28-member European Union.
The industry blames electricity prices that are highest in the region, dumping of subsidised, cheap Indian yarns and fabrics, heavy taxes on exports and energy shortages for the plummeting exports.
“The decisions on these crucial issues have been delayed because of financial implications for the government. However, the minister has promised that a way out will be worked out to help the industry on his return from the US tour (with the prime minister),” Aptma-Punjab chairman Amir Fayyaz told Dawn by telephone.
“We appreciate that Mr Dar gave us his time, listened to our grievances and agreed to most of our demands. We are hopeful that the remaining issues facing the textile industry will be taken care of on the prime minister’s return from his US visit,” Mr Fayyaz added.
Published in Dawn, October 18th , 2015