Dyes, chemicals imported under EFS: PCDMA calls for stronger monitoring mechanism

KARACHI: The Pakistan Chemicals & Dyes Merchants Association (PCDMA) has called for a stronger monitoring mechanism to prevent the possible misuse and diversion of dyes and chemicals imported under the Export Facilitation Scheme (EFS).

In a letter to Federal Board of Revenue (FBR) Chairman Rashid Mehmood Langrial, PCDMA Chairman Salim Valimuhammad proposed a digital tracking and reconciliation system to monitor the movement and utilization of imported materials and ensure that EFS facilities are used for their intended purpose.

The association expressed particular concern over textile dyes & chemicals, including reactive dyes imported under PCT 3204.1600, saying that the issue warranted greater scrutiny amid increasing imports under the scheme without a corresponding increase in exports.

Pakistan’s textile industry is a major contributor to exports and foreign exchange earnings. The PCDMA said it fully supported government initiatives aimed at facilitating exporters, boosting manufacturing and increasing exports, but stressed that effective monitoring was necessary to prevent misuse of the facilities.

According to the Salim Valimuhammad, manufacturing textile products such as bed sets, towels, sheeting, woven fabrics and knitted garments — including T-shirts, fleece, pajamas and undergarments — involves three major cost stages: raw materials, processing, and value addition through cutting, stitching, sewing and packing.

He said that, as an indicative industry estimate, processing may account for around 8–10 percent of the total article cost, with dyes & chemicals representing up to approximately 25–30 percent of the processing cost. These proportions may vary depending on the product, shade and finishing requirements.

The PCDMA represents the local dyes and chemicals merchant community, which supports textile processing units by ensuring the availability of required materials. However, the increasing imports under EFS, without a corresponding increase in exports, have raised serious concerns within our business community. Possible diversion of these materials into the domestic market, including undocumented sales.

The association, which represents local merchants dealing in dyes and chemicals, said its members played an important role in ensuring the availability of materials to textile processing units.

However, it said the increase in EFS imports without a corresponding rise in exports had raised concerns among local businesses. The PCDMA apprehended that imported materials could potentially be diverted to the domestic market, including through undocumented sales, affecting legitimate importers and established businesses that had supported the textile industry for years.

The association also acknowledged that determining the exact consumption of dyes and chemicals was technically complex because requirements varied according to fabric type, shade, processing methods, machinery and finishing specifications.

It therefore proposed a practical and transparent monitoring mechanism that could account for these industry-specific variations.

Under its proposal, The PCDMA chief asked the FBR to introduce a digital tracking and reconciliation system linking EFS imports with production, inventory and export shipments. This, it said, would enable the authorities to reconcile imported quantities with actual utilization.

The association also proposed establishing reasonable consumption norms that would take into account variations in processing conditions, legitimate wastage and closing stock.

It further recommended risk-based audits and physical stock verification where significant discrepancies or possible diversion to the domestic market were identified.

Salim Valimuhammad was of the view that where misuse or diversion was established, the applicable duties and taxes should be recovered in accordance with the relevant laws.

He suggested that the proposed monitoring mechanism initially be introduced for reactive dyes under PCT 3204.1600 as a pilot exercise, before being extended to other dyes and chemicals on the basis of the pilot’s findings.

The PCDMA maintained that it supported the government’s efforts to increase exports and earn foreign exchange. However, it stressed that the benefits provided under EFS should reach their intended beneficiaries while protecting government revenue and maintaining a fair and transparent business environment for both exporters and legitimate local importers.

The association also offered to share its industry observations and supporting information with the relevant authorities and said a brief annexure containing the proposed monitoring mechanism and relevant industry data had been attached to the letter for consideration.

Copyright Business Recorder, 2026