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ISLAMABAD: A meeting of the Economic Coordination Committee (ECC) of the Cabinet may give approval to removal of five percent Regulatory Duty (RD) on the import of cotton yarn till 30 June, 2021, and a procedure for registration under concessionary regime of electricity, the RLNG and gas under export-oriented sectors (erstwhile zero-rated sectors). The ECC meeting to be presided over by Adviser to the Prime Minister on Finance, Dr Abdul Hafeez Shaikh, would be presented a proposal by the Commerce Division. The Commerce Ministry's has sought ECC's approval for removal of Regulatory Duty on import of cotton yarn till 30 June, 2021.

Another Commerce Ministry's proposal will be with respect to a procedure for registration under concessionary regime of electricity, the RLNG, and gas, under export-oriented sectors (erstwhile zero-rated sectors).

The ECC meeting would also consider Communication Division's proposal for conversion of the National Highways Authority loans into government grant or waive off.

The ECC would also consider the Ministry of Industries and Production's proposal for approval of nomination of USC as recipient agency for import of sugar, and release of funds for the SSGC in lieu of gas supply to the Pakistan Steel Mills (PSM).

The ECC would also take up the Ministry of Housing and Works' proposal for arrangement of additional funds for maintenance of the Islamabad High Court building, Islamabad, and 07-Judges Residences, Islamabad.

The meeting would take up three proposals of the Petroleum Division; (i) allocation of gas from M/s PPL's Benari X-1 Discovery to M/s SSGCL; (ii) allocation of Gas from PPL's Hadaf X-1 to SSGCL; (iii) allocation of gas from Yasar X-1 field to third party during EWT Production.

The National Tariff Policy 2019-24 stipulates that all proposals for levy, amendment or removal of tariffs including regulatory duties and customs duties shall be examined at the Tariff Policy Centre (TPC) and after approval by the Tariff Policy Board (TPB), shall be submitted by the Ministry of Commerce to the Cabinet or Parliament, as the case may be, for consideration. Textiles and Apparel sector occupies a pivotal position in Pakistan's economy having most intensive backward and forward linkages compared to any other sector. It contributes approximately 60% in total exports of Pakistan and 40% in industrial employment.

Pakistan domestic Cotton production has been the backbone of the textile sector. However, due to various reasons, the local production of cotton is on the decline. This year, the situation is more serious due to estimated production of 8.5 million bales against the 12 million bales average per year production in the last 14 years.

The consumption, on the other hand, has remained around 13.8 million bales annually in the same period. Since the local production of cotton has reduced drastically, the production of cotton yarn is also expected to be adversely affected in the country. This situation is likely to create problems for the downstream value-added segments of textile sector such as manufacturers of fabric, garments and made-ups.

Currently, there is no custom duty on the import of cotton in the country, however, cotton yarn is subject to 5% customs duty and 5% Regulatory Duty. This tariff structure along with shortage of local production of Cotton, has increased the protection of spinning units (yarn manufacturers) vis- a- vis the downstream manufacturers/value added sector.

In view of situation, Commerce Ministry has proposed that 5% Regulatory Duty may be removed on cotton yarn (HS Codes 5205, 5206, 5207) till June 30, 2021, by which time the situation of cotton yarn vis a vis cotton production in the country will again be reviewed. The total revenue impact of the exemption of Regulatory Duty will be of Rs 185 million.

The Tariff Policy Board, in its 18th meeting on November 12, 2020, has recommended the removal of Regulatory Duty on Cotton Yarn.

Copyright Business Recorder, 2020

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