ISLAMABAD: Cable and wire manufacturers have demanded tax exemptions similar to ones offered to Chinese and other importers.
They said the current exemptions from customs duty and sales tax on the import of wire and cable for CPEC projects promoted imports from China at the cost of local industry.
In the first quarter of the current fiscal year, 88 per cent (or $21 million) of wire and cable imports were originated from China, according to official data.
In the latest budget the government exempted imports and supply of materials and equipment, including electrical wire and cable, for the development of Gwadar port and free economic zones. But these exemptions were not extended on goods produced locally.
Furthermore, the benefits provided to companies in special economic zones only apply to joint venture companies with foreign partners.
Certain customs general orders also discriminate between local and imported wires and cables.
The local manufacturers who have approached the government include Allied Industries (Pvt), Ltd, Atta Cables (Pvt), Ltd, Eagle Cables (Pvt), Ltd, Fast Cable Ltd, H.M. Esmail & Company, Newage Cables (Pvt), Ltd, Pakistan Cables Ltd, Steel Complex (Pvt), Ltd, and Universal Cable Industries.
At the launch of the CPEC, it was announced that China will invest $36bn in the power sector which will benefit electricity cables businesses in Pakistan.
Power plants of 25 megawatts and above are allowed to import wires and cables at a reduced rate of customs and zero sales tax. However, these power projects will have to pay 17pc sales tax in case they buy from local manufacturers. The local manufacturers have also sought zero sales tax to plants of over 25MW.
Most of the primary raw materials for the cable and wire industry are not produced in Pakistan. Duties on raw materials have been on the rise over the years. This has made the local industry less competitive as compared to imports. For example, the customs duty on base metals — copper cathode and aluminum ingot — was 3pc along with additional customs duty of 1pc.
The local industry is also facing low cash flows due to advance tax of 5.5pc at import stage. Since the majority of raw materials are imported and are of high value, advance tax import stage on these items result since huge cash flow blockage.
The industry demands relaxation in this regard to overcome the cash-flow problems.
The local manufacturers also demand 10pc regulatory duty on certain products to provide protection to local manufacturers.
Published in Dawn, April 16th, 2017