ISLAMABAD: Prime Minister’s Advisor on Commerce and Investment, Abdul Razak Dawood said on Friday that Finance Ministry will communicate the final figure of funds for Duty Drawback on Local Taxes and Levies (DLTL) for FY 2021-22 with Commerce Ministry, “after its own envelope size is finalized.”
Finance Division has conveyed that it is ready to allocate Rs 20 billion for DLTL scheme for 2021-22 but it will not be sufficient to accommodate the demands of duty drawback schemes for textile and non-textile sectors. Commerce Ministry wants Rs 40-50 billion for this purpose.
In an interview, when Commerce Advisor was asked about exact allocation for DLTL, he stated that Finance Ministry has conveyed to him that the expected allocation for DLTL for FY 2021-22 is subject to further thinking.
"I cannot share any number to be allocated for DLTL until Finance Division gives final figure," he added.
Commerce Ministry's effort is to get maximum allocation for DLTL but as Ministry of Finance says it does not yet know the size of its envelope and only when they know the envelope size, will they convey to us the final number for DLTL," he added.
Razak Dawood said Pakistan's export base is “much too narrow” and limited to textiles, leather, surgical instruments etc. The country has to go for new sectors and support will be extended to pharmaceutical, engineering (two wheelers, three wheelers, refrigerators', washing machines, cutlery, mobile phones and transformers), food processing and diversification in textile sector, he emphasized, adding that duties on raw materials of more industries will be reduced in the forthcoming budget.
He further revealed that duties will be reduced for import substitution industries, which in time will increase output and begin to export excess supply and begin to compete with other countries.
On a question as to how trade gap will be managed when import of raw materials will increase as a result of a reduction in duty he said raw materials will be used for fuelling industrial output.
The reduction in duty on raw materials means minimization of anti-export export bias, in addition to fuelling output and job creation, Dawood said.
In response to a query as to how Commerce Ministry's budget proposals will support STPF and Textile Policy, Razak Dawood said that his budget proposals will certainly fit into the two policies. He further maintained that Textile Policy was almost cleared but got stuck due to energy prices. Now, after discussion with Finance Minister Shaukat Tarin, it has been agreed to fix 9 cents per unit electricity rates for exporters and gas at $ 6.5/MMBTU for next fiscal year. However, he hoped that when this case will be presented to the Prime Minister, its applicability duration will be increased.
In reply to a question about imposition of Regulatory Duty (RD) and Additional Customs Duty (ACD) instead of increasing normal customs duty, he said that the objective of Finance Ministry is to increase revenue and it has prepared such proposals but precisely how much duty Commerce Ministry agrees to will be discussed before the presentation of the budget.
"I don't think raising customs duty is the right approach. As a principle I am also anti Additional Customs Duty and as a principle I want RD to only be imposed to protect local industry," he continued.
Razak Dawood argued that increase in normal duty or imposition of RD give two different signals, adding that RD means that protection is required for a specific industry for a specific time and when the situation is normal it will be withdrawn. He said, there should be no up or down in extra duty for industry.
The driving principle, he added, is that duty on raw materials should be zero or a maximum of 3 percent, intermediary goods 6 percent or 11 percent and finished goods 20 percent.
In response to a question as to how much industrial growth and increase in exports will be possible through tariff rationalization Razak Dawood replied that he does not have empirical data, however, he added that since Pakistan removed all duties on import of raw jute, it began competing with Bangladesh. Pakistan is now exporting made-ups of jute of around $ 35 million.
Razak Dawood contended that he cited the export target figure of $ 28 billion by projecting exports of textile sector to rise from $ 13 billion in 2019-20 to $ 16 billion in 2020-21 and textile sector pledged to increase its exports to $ 20 billion. If textile sector ensures $ 20 billion then $ 8 billion will be added from other sectors.
However, he said that exports target for 2021-22 will be finalised after export figures of May 2021 are received. He did not give any projection about imports in 2021-22.
“There is no doubt imports have increased this year but I do not know if Pakistan will import wheat, cotton or sugar and what will be the price of petroleum products," he said, adding that import of machinery will definitely increase.
Copyright Business Recorder, 2021
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