Textile refunds

One of the core issues in the textile industry – or really, any export-oriented industry – that keeps grabbing headlines is that of pending refunds. Recently, BR Research was given a breakdown of the pending reimbursements by a member of Pakistan Textile Exporters’ Association.

Now, there is a wide divergence in the refund claims by exporters and the calculations of the FBR; the latter claim the figure to be around Rs100 billion, while the former say the number is more than twice that. The following is the breakdown of the refunds as per our interactions.

There are apparently three layers: FBR refunds, Textile Policy refunds, and the PM’s package. FBR has Rs37 billion RPOs (refund payment orders) outstanding since July 2016; Rs40 billion is deferred sales tax, a big portion of which is with Punjab Revenue Authority (PRA) and Sindh Revenue Board (SRB); Rs20 billion is customs rebate; and Rs15 billion is due in income tax and income tax credit under section 65.

The sum total lying with the central and provincial revenue authorities thus comes to around Rs112 billion.

Then, there is a total of Rs40 billion pending under the Textile Policy(s), while the Prime Minister’s latest package owes the industry Rs30 billion. Finally, the allocation under the budget for the current financial year was Rs6 billion, out of which not a single rupee was disbursed. From last year, Rs5 billion was budgeted, out of which only Rs0.7 billion were given. So, this adds up to another Rs10 billion.

Whatever the grand total, be it Rs100 billion or Rs200 billion, the fact of the matter remains that liquidity crisis remains one of the core issues of the textile industry, which at present is operating at almost 50 percent capacity. The government should disburse the funds on a war footing in order to give textile industry some relief and curb the falling exports.

Instead, however, we are hearing that the FBR has been directed not to release the amount of cleared RPOs! To what length is the government willing to curb budget deficit, and at what cost?