• Around 1,100 items slated to face regulatory duties, compared to 860 items covered last year
• Commerce minister spearheads push to revive competitive gas, power rates for export sectors
ISLAMABAD: With a gap of less than six months, the caretaker government is again working on imposing prohibitive regulatory duties on a longer list of luxury and non-essential import items as part of a broader strategy aimed at curbing the rapid depletion of the country’s scarce foreign exchange reserves.
Simultaneously, the administration is also actively working to revive regionally competitive gas and electricity rates for five export-oriented sectors, with possible modifications that could be acceptable to the International Monetary Fund (IMF), along with other facilitations to support foreign exchange inflows through exports.
Sources told Dawn these proposals have broadly been discussed at the recent meetings of the Special Investment Facilitation Council (SIFC), a newly formed decision-making body comprised of both civilian and military leadership. Leading the charge in this initiative is Caretaker Commerce Minister Gohar Ejaz, the patron-in-chief of the all-influential All Pakistan Textile Mills Association (Aptma).
Notably, Pakistan’s import portfolio, which totalled $55 billion last year, saw $17bn allocated to oil imports. The food sector also constituted a substantial chunk, with $9bn, including $3.6bn in palm oil imports. Textile imports accounted for around $3.7bn, including $1.7bn in raw cotton imports.
The heavy timebound regulatory duties were imposed in August last year after the previous government came under international pressure to remove a complete ban on imports. Under the World Trade Organisation’s rules, no government can indefinitely ban imports, but regulatory duties could be imposed under different thresholds from case to case.
More items to face duties
Officials said that the items to come under various levels of regulatory duties this time would be around 1,100 — almost 30pc — more than about 860 items that had come under higher regulatory duties in August last year.
In addition, changes in procedural regulations are also under active consideration for the import of three-year-old vehicles (both small and luxury). Interestingly, many items under consideration for the application of regulatory duties also pertain to essential intermediary raw materials for export sectors, including textiles and particularly chemicals, footwear and so on.
The finance ministry has been pursuing a petroleum products’ pricing policy that excludes subsidies but aims to recover the full imported cost, including exchange rate losses, in addition to imposing substantial taxes through a petroleum levy capped at Rs60 on petrol and Rs50 on diesel.
This levy is calibrated to maintain an average petroleum levy of Rs55 per year, as stipulated in an agreement with the IMF. It is speculated that the levy on diesel may see further increases in the coming months.
The vegetable/cooking oil would now be the second largest item to come under a regulatory duty to dent its consumption and thus foreign exchange loss.
As for changes to automobile imports, the sources said that small vehicles would be permissible to overseas Pakistanis remitting $50,000 back home per year, while the similar limit would exceed $5 million in the case of luxury vehicles, such as 4x4s.
The sources said Commerce Minister Ejaz had fought a strong case in the SIFC’s last week marathon sessions to revive the zero-rated status and regionally competitive tariff (electricity at 9 cents per unit and gas at $7.5 per unit) that the Pakistan Democratic Movement’s government withdrew to meet IMF conditions.
The scheme could be partially revived on incremental consumption of energy when compared with last year and conditioned to an increase in exports. Also, the export industries, particularly textiles, could be offered direct electricity purchase from nearby power plants on payment of wheeling charges to distribution companies to ensure uninterrupted supply and fluctuation-less load to the industry. This may be opposed by the Discos unless their revenue stream is not protected.
In May last year, the PDM government banned 860 items of 33 categories but withdrew them three months later to pacify international opposition to the revival of the IMF programme.
Published in Dawn, September 11th, 2023