ISLAMABAD: Adviser to the Prime Minister on Commerce Razak Dawood has said that the government will take measures in the coming budget to reduce the custom duty for increasing exports of synthetic fiber (technical exports).
The adviser stated this while briefing the Senate Standing Committee on Commerce about draft Textile and Apparel Policy 2020-25 on Thursday, which envisages rationalization of custom tariffs and taxation regime and offers Rs925 billion incentives for growth of textile and apparel exports to $19 billion by 2024-25.
The adviser on commence said that Pakistan has been heavily relying on 70 percent cotton exports and 30 percent man-made fiber (synthetic fiber), whereas, in other countries, situation was vice versa, with 70 percent technical exports and 30 percent cotton.
The adviser said he was struggling to dismantle the custom duty imposed to increase the revenue collection after going into the International Monetary Fund (IMF) programme. The additional custom duty two percent was abolished and in budget, three percent duty will also be abolished, he added.
He said that when the government went into the IMF programme, the IMF contention was that Pakistan revenue collection is very low and there is need to increase it. Therefore, the government decided to impose two percent, four percent, and seven percent, addition custom duty, he said, and added that now he was fighting to abolish it. The adviser also sought the committee’s support for removal of custom duty on imports as said that the Federal Board of Revenue (FBR) may resist it on the contention of revenue increase.
The committee members agreed that revenue increase should not have been linked with imports, whereas, adviser stated that his ministry would make propose reduction in duties in the coming budget for technical exports increase.
He said that he has informed the FBR through historical data that whenever duties were increased, their impact on exports was very negative (exports declined). Razak Dawood further stated that percentage of revenue that comes from custom duty is very low in India and Bangladesh, and almost negligible in the developed countries.
The adviser said he was also fighting for five-year offering a fix gas and electricity price in proposed textile policy, and some progress has been made on Wednesday after five or six meetings. He said, “consistency and predictability are primary features of the third proposed draft policy.”
Senator Mehmoodul Hussan said that Pakistan has now been importing $4 billion cotton as country’s cotton production has declined from 1.5 million bales to seven million bales largely due to non-availability of quality seeds. He added that farmers are not getting any benefit from cotton growing and per acre cotton area has massively declined as farmers have shifted to cane crop. He suggested that the government should take the responsibility to assist the farmers in terms of seeds through advertisement in media.
Earlier, the DG textile Ministry of Commerce in his briefing to the committee highlighted the high cost of doing business, liquidity crunch/cash flow, consistent/predictable policies, continuous decline in cotton production, as well as high import tariffs, withdrawal of zero rating, low domestic and foreign investment, product diversification and limited focus on market diversification as major challenges for textile export.
He added that the previous two textiles policies, - 2009-14 and 2014-19 - were formulated to enhance textiles through support of fiscal measures of Rs188 billion and Rs65 billion respectively. However, these targets were not fully achieved due to delayed/no payments under the respective facilitation schemes and non-allocation of funds for infrastructure development, vocational training, productivity and compliance-related programmes.
He said that draft Textiles and Apparel Policy 2020-25 is formulated in consultation with public and private stakeholders and it proposes Rs925 billion incentives not only limited to availability of energy at regional competitive prices and long-term assurance but rationalization of custom tariffs and taxation regime.
He said that draft policy also proposes simplification of temporary importation schemes, duty-free import of textiles and apparel machinery and spare parts, revision of custom duty drawback rates for value-added products, enhanced long-term financing facility disbursements and scope, lower mark-up rates of financing schemes and long-term assurance, restoration of tax credit for investment, setting up of state-of-the-art industrial cities and expo centers, revitalization of existing garments cities, establishment of combined effluent treatment and water recycling plants, pursuing zero rating of entire value chain, machinery and spare parts, focusing on research and development, product diversification, support for testing and accreditation.
Copyright Business Recorder, 2021