ISLAMABAD: In a marked deviation from its stated tariff reform agenda, the government has retained regulatory duties (RDs) on the import of over 300 tariff lines — including seafood, fruits, and vegetables — in a bid to shield domestic producers, triggering concerns over the credibility of the five-year Tariff Policy Reform (TPR) plan.

The Federal Board of Revenue (FBR) notified the revised RDs on Monday following approval from the federal cabinet. The move reverses an earlier decision under the TPR to reduce RDs to zero on these items from July 1, a plan that was already ratified by the prime minister and the cabinet.

The U-turn comes amid mounting pressure from local agricultural lobbies and select industries, reflecting the challenge of balancing reform with vested interests. The total import volume of the affected tariff lines constitutes less than 0.02pc of the country’s overall imports, yet these products still attract customs duties (CDs) of 15-20pc and an additional customs duty (ACD) of 2.4pc. The current RDs range between 10pc and 35pc.

Despite the negligible trade volume, the steering committee had recommended the complete elimination of RD to simplify the tariff regime and lower consumer costs — a suggestion initially endorsed at the highest levels of government. However, the government has now reversed course, citing revenue needs and industry protection.

Regulatory duties on seafood, fruits, vegetables and industrial inputs restored under pressure from domestic lobbies

Among the sectors benefiting from restored protection are polyester filament yarn, soda ash, hydrogen peroxide, ceramics, and iron & steel. For instance, polyester filament yarn now carries a CD of 10pc, RD of 2.5pc, and an anti-dumping duty of 5–20pc. Though a zero RD was initially approved, industry pressure led to the re-imposition of the 2.5pc duty.

Additionally, RDs on numerous intermediate goods — such as chemicals, hot-rolled coils (HRC), and IT and telecom hardware — which were earlier set to be reduced, have also been increased. These measures are expected to generate an estimated Rs20bn in additional revenue. However, analysts warn that higher duties on critical inputs may undermine the export competitiveness of textiles, light engineering, and IT services — key sectors targeted under the reform agenda.

Reversal in original TRP

As a result of last-minute amendments, the average RD under the current plan has risen to 3.72pc from 2.96pc in the original proposal. The overall simple average tariff (SAT) now stands at 16.58pc, compared to 15.83pc previously.

The TPR was originally designed to cut the SAT by 50pc over five years, with aggressive reductions of over 20pc annually in the first two years. The sudden changes have not derailed the broader reform roadmap, but the manner in which they were introduced has raised serious concerns.

The original plan was finalised after six meetings of the steering committee and was unanimously approved by the cabinet and the prime minister. In its sixth meeting, the committee agreed that any further changes to CD, ACD, or RD would not only deviate from the National Tariff Policy but also complicate the system. Yet, those same changes were later pushed through without input from the original consultants, who were excluded from the final decision-making process and not allowed to raise objections.

The developments have cast doubt over the government’s resolve to resist pressure from powerful interest groups. With deeper cuts in tariffs on auto, iron & steel, and the polyester chain scheduled for next year, concerns are growing that the government may once again bow to pressure — potentially undermining the long-term objective of boosting exports through a simplified and competitive tariff structure.

Published in Dawn, July 1st, 2025