ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet will take five crucial decisions on Wednesday linked with the implementation of an ambitious Textile and Apparel Policy 2020-25, Dawn has learned from knowledgeable sources on Tuesday.
The decisions, which are mostly political in nature, are expected to generate heated debate in the ECC meeting to be chaired by Finance Minister Dr Hafeez Shaikh. The policy will be the third in a row for the sector.
One of the major policy decisions is the revival of zero-rating for the five export-oriented sectors. The Federal Board of Revenue (FBR) has sought time for consultation on this crucial issue with the International Monetary Fund.
Official documents seen by Dawn show that the Textile Division proposed to provide electricity at cents 7.5/kWh all-inclusive. The subsidy amount allocated for this at Rs243 billion for a period of five years.
The government will provide RLNG at the US $6.5/mmBtu for the next five years. An amount of Rs111bn will be allocated for providing gas at a concessionary rate to the industry.
It has been proposed to allocate Rs420bn for payment of Drawback of Local Taxes and Levy (DLTL) scheme and duty drawback of tariff for value-added products, which is simply a cash subsidy on exports proceeds from the country.
Under the scheme, the government will provide support at four per cent to garments and technical textiles, 3pc to made-ups. This support will be binding on the government for the next five years.
It was also decided in principle to bring no change in the existing Export Finance Scheme (EFS) and Long Term Financing Facility (LTFF) schemes. It was decided to continue the LTFF at 5pc for investment. The total amount allocated for LTFF is Rs75bn.
The EFS at a rate of 3pc will continue for the next five years. The amount proposed for the scheme is Rs109bn.
The total amount to be spent in these five areas is estimated at Rs958bn. The allocation of this amount will be spread over five years.
The Textile Division has also evolved a comprehensive roadmap of facilitation measures for the value-added sectors to be implemented in a minimum of three months to a maximum of two years.
It has been proposed to carry out tariff rationalisation of the textile and apparel value chain in the next six to 12 months and simplification of temporary importation schemes. The duty drawback rates and to upgrade the system besides providing the LTFF to indirect exporters.
It has also been proposed to provide the LTFF for infrastructure development in apparel/made-ups, enhance project limit of the LTFF as well as enhancement of disbursements by Rs100bn per annum. It was also proposed to restore the tax credit for investment, establish new garment cities, establish combined effluent treatment and water recycling plants, develop an international brand and acquisition scheme.
The proposed policy estimates that the measures will lift the value-added textile exports to $14.781bn by end June 2025 from $9.498bn to be achieved by end June 2021. The textile exports will reach $4.146bn at the end of June 2025 from $3.362bn. The export estimations are projected by the Commerce Division.
The proposed policy is laden with measures to tackle issues confronting the textile sector amid Covid-19 that has resulted in supply chain disruptions, affected global prices of commodities hitting trade adversely, while also addressing the issues of the withdrawal of SRO-1125 and cost of doing business.
Furthermore, the policy should attract domestic and foreign investment in the textiles value chain and the development of value-added sectors, with a prime focus on small and medium enterprises (SMEs).
Published in Dawn, January 13th, 2021