ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has demanded an immediate ban on the import of yarn and cloth under the Export Finance Scheme (EFS), warning of a deepening crisis in the domestic textile sector.
Addressing at a press conference in Islamabad, APTMA Chairman Kamran Arshad - accompanied by Dr Jassu Mal, Chairman of the Pakistan Cotton Ginners Association (PCGA), and former PCGA chairman Sohail Harral — said that despite year-long negotiations with the Federal Board of Revenue (FBR) and the Ministry of Finance, the industry’s concerns have gone unaddressed.
“The EFS was introduced in 2021 and performed well for the first 18 months, helping textile exports reach $19.5 billion. But for the past three years, exports have stagnated,” Arshad said.
APTMA speaks about challenges facing industry
Under the FY25 Finance Bill, the government removed the sales tax exemption on locally sourced inputs under EFS, while keeping imported raw materials exempt from both sales tax and customs duties. This, APTMA argued, has created an uneven playing field.
“Imports of textile raw materials have surged. As a result, 120 textile mills and 1,200 ginning units have shut down,” Arshad stated. “We’ve made consistent efforts to revive the EFS framework but have not been successful.”
While the 18 percent sales tax on local inputs is technically refundable, the APTMA maintains that the refund process is plagued by delays, incomplete payments, and high compliance costs—particularly harming small and medium-sized enterprises (SMEs).
“Only 60–70 percent of refunds are processed, and the rest remain stuck in manual systems for years,” said Arshad.
This disparity has prompted exporters to shift toward imported inputs, undercutting local suppliers. According to the APTMA, textile exports increased by $1.5 billion in FY25, but imports of cotton, yarn, and greige cloth rose by a larger margin of $1.6 billion — widening the trade gap.
The association highlighted that over 100 spinning units — representing 40 percent of total capacity — have shut down, while the remaining units are operating at below 50 per cent capacity and are on the verge of closure. The crisis is expected to spill into downstream sectors soon.
SMEs, which lack the infrastructure to import materials directly, are hit hardest as they pay taxes at every stage of production, unlike integrated units that benefit from structural efficiencies.
The APTMA also pointed to a growing crisis in cotton farming. In the absence of a support price and amid falling demand from local spinners, many farmers are switching to water-intensive alternatives. Pakistan’s cotton production has fallen to a historic low of five million bales and is expected to decline further.
“The cotton economy supports $2–3 billion in rural incomes, especially for women in cotton picking,” Arshad said. “Thousands of livelihoods are at risk. Policy adjustments could boost net foreign exchange earnings by $1.5–2 billion.”
The APTMA also warned that the United States has indicated it may impose a 29 per cent tariff on all Pakistani exports unless the country addresses its trade surplus with Washington. Cotton remains Pakistan’s largest import from the US, which has shown willingness to export up to 1.5 million bales to Pakistan — but only if the local spinning industry can absorb it.
Although interest rates have declined from 22 percent to 12 percent and electricity tariffs have been reduced by Rs7.69 per unit, the APTMA argued that these gains are being neutralised by policy setbacks related to the EFS.
“If the domestic spinning sector isn’t revived, the additional US cotton won’t be importable,” Arshad said, stressing the urgency of reinstating sales tax exemptions on local raw materials and banning all yarn and cloth imports under EFS.
The APTMA estimated that around six million families depend on the textile sector for employment and warned that continued inaction could accelerate industrial decline and worsen the country’s trade and fiscal imbalances.
Copyright Business Recorder, 2025
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