Financial impact of PM''s package readjusted

The Economic Co-ordination Committee (ECC) of the Cabinet has reportedly readjusted financial impact of Prime Minister''s package of incentives for exporter prepared after months of consultative process. Well-informed sources in Finance Ministry told Business Recorder that the ministry had estimated Rs 38.7 billion for garments sector at 7 percent duty drawback but after discussion the amount was slashed to Rs 37.6 billion. Likewise, financial impact on made-ups was slashed from Rs 30.3 billion to Rs 29 billion at 6 percent duty drawback.
However, the ECC did not change financial impact of Rs 8.8 billion at 5 percent duty drawback on processed fabric. The estimated financial impact of Rs 14.1 billion was reduced to Rs 12.1 billion on yarn and greige fabric at 4 percent duty drawback. The total estimated financial impact of Rs 91.9 billion was reduced to Rs 87.5 billion. The amount for non-textile sector remained unchanged at Rs 12.5 billion on basis of various rates ranging from 5 percent to 7 percent.
The sources said the Ministry of Finance had estimated financial impact of withdrawal of duty and sales tax on cotton imports at Rs 5 billion but the ECC increased it to Rs 10 billion. However, the financial impact of withdrawal of duty on manmade fibre (other than polyester) and zero rating of textile machinery imports would remain at Rs 3 billion and Rs 7 billion respectively.
The Finance Division informed the ECC that despite a significant improvement in the country''s macroeconomic framework, one sector that was lagging behind was the exports sector. In the past two years, exports had declined from high $25 billion to around $22 billion. It was felt that unless the declining trend in exports was arrested, it may soon begin to adversely affect the balance of payment position of the country. The exporters were demanding incentives to offset the rising cost compared to their competitors'', largely a result of incentives offered to rivals by their countries. They had been citing most recent concessions given to the exporters by the governments of some regional countries that are directly competing with Pakistan''s exports.
The Finance Division further said the government had held consultations with the relevant stakeholders during the last several months. With a few to mitigating exporters'' difficulties, a set of incentives had been formulated. The package, which was primarily on duty drawbacks and some other initiatives, was applicable for exports Goods Declaration (GDs) filed on or after January 16, 2017 till June 30, 2018. However, the package for fiscal year 2017-18 would be available to only those exporters who would achieve an increase of 10 percent in their exports as compared to their exports of fiscal year 2016-17. The package would have estimated financial/ budgetary impact of Rs 180 billion. The official documents reveal that total financial impact for one year has been calculated at Rs 132.5 billion after readjustments in amount expected to be extended to the exporter in the name of duty drawback.
The final package approved by the ECC is as follows:

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PM''s Package of Incentives for Exporters:
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Sector                                 Rate of Duty Estimated Annual
                                        Drawbacks   Financial Impact
                                                        (Rs Billion)
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TEXTILE
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Garments                                     7%                 37.6
Made-ups                                     6%                 29.0
Processed Fabric                             5                   8.8
Yarn and Greige Fabric                       4%                 12.1
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NON-TEXTILES
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Sports goods incl. gloves & footballs        7%                  2.7
Leather manufactures including garments      7%                  4.2
S Leather tanned                             5%                  1.9
Footwear                                     7%                  0.9
Surgical Goods                               5%                  1.9
Cutlery                                      5%                  0.3
Carpets & Rugs                               6%                  0.6
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Total                                                          100.0
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OTHER INCENTIVES:
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SNo  Subject                                        Estimated Annual
                                                    Financial Impact
                                                        (Rs Billion)
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1. Withdrawal of duty & sales tax on cotton imports             10.0
2. Withdrawal of duty on MMF (other than Polyester)              3.0
3. Zero rating of textile machinery imports                      7.0
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   Total:                                                       20.0
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