Textile industry faces liquidity crunch

Updated November 15, 2019

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In this photograph taken on November 16, 2016, Pakistani workers operate a machine at a textile factory in Faisalabad. — AFP
In this photograph taken on November 16, 2016, Pakistani workers operate a machine at a textile factory in Faisalabad. — AFP

KARACHI: The textile industry on Thursday warned that due to non-payment of refunds worth around Rs80 billion, there was an acute liquidity crunch.

Addressing a press conference, All Pakistan Textile Mills Association (Aptma) Chairman Amanullah Kassim regretted that time and again, the government had been committing to make timely payment of refunds but this never materialises.

He said after removing five export-oriented sectors from zero rating from July 1, the government under pressure of International Monetary Fund imposed 17 per cent sales tax on exports on the assurance that refunds would be paid within 72 hours. However, he said the software developed by the Federal Board of Revenue (FBR) under the name of FASTER for payment of refunds failed to operate properly, resulting in blocking of significant sums.

The chairman was accompanied by other senior members including Gohar Ejaz from Lahore, who were highly critical about the approach of government towards payment of refunds which was directly damaging the country’s exports.

They asked the government as to how exporters can meet their commitments when they have no funds to pay salaries, utility bills or purchase raw materials for new orders.

These leaders reiterated that all the export-oriented sectors should be reverted back to zero rating which would mean no collection of sales tax and no refund. This will help them fulfil their export commitments without facing liquidity crunch.

Arguing that nowhere in the world exports are taxed, they said if the government wants to impose sales tax it should be on local sales only.

Aptma expressed serious concern over the failure of cotton crop which would not be more than nine million bales, as against government estimated production of 15m.

They warned the government to work in advance for next cotton crop which could be even smaller in size because of issues related to quality.

The textile body also drew the attention of government towards 700 pesticide supplying companies operating in the country and believed this was one of the major factors for the supply of substandard pesticides to growers.

Published in Dawn, November 15th, 2019