De­lay in in­cen­tives pack­age im­pact­ing ba­sic tex­tiles

Enterprise - - National news -

The de­lay in the pro­posed in­cen­tive pack­age for the five zero-rated ex­port sec­tors of the coun­try is im­pact­ing the ba­sic tex­tile sec­tor more than oth­ers.

The pack­age is fi­nalised and ready, but is be­ing de­layed as it will be an­nounced by the Prime Min­is­ter, who can­not spare time due to the on­go­ing po­lit­i­cal tur­moil in the coun­try. Busi­ness­men stress that ex­ports must be given the same im­por­tance by the gov­ern­ment that is be­ing given to China Pak­istan Eco­nomic Cor­ri­dor (CPEC) re­lated projects. They said these projects are al­most on tar­get, de­spite strikes, agitation or spo­radic ter­ror­ist hits in the coun­try.

The pack­age has much to of­fer all ex­port­ing sec­tors. The gov­ern­ment has ac­ceded to the de­mand of the ex­porters to pro­vide duty draw­back of lo­cal taxes and levies they paid on buy­ing in­puts from the lo­cal mar­ket.

It has fixed a draw­back of four per­cent on ex­port of yarn and grey fab­ric, five per­cent on ex­port of pro­cessed fab­ric, and six per­cent on ex­port of cloth­ing. Fifty per­cent of this draw­back will be pro­vided in cash and 50 per­cent in the form of vouch­ers that could be cashed on im­port of tex­tile ma­chin­ery.

The in­dus­try re­quested that these vouch­ers should be al­lowed to be ad­justed against gov­ern­ment taxes also but it was turned down. The draw­back rate for non-tex­tile sec­tors will prob­a­bly be five per­cent. This step will im­prove the com­pet­i­tive­ness of all five zero-rated ex­port­ing sec­tors.

An­other con­ces­sion granted is al­low­ing re­fund of pack­ing ma­te­rial pur­chased from reg­is­tered sup­pli­ers. This fa­cil­ity was ear­lier de­nied when the five sec­tors were de­clared zero-rated last year. This will pro­mote the do­mes­tic pack­ag­ing in­dus­try and dis­cour­age pack­ag­ing im­ports.

To re­move short­age of raw ma­te­ri­als, gov­ern­ment has agreed to with­draw four per­cent duty on im­ported cot­ton. At the same time, im­port duty on man­made fi­bres not pro­duced in Pak­istan will also be with­drawn.

Long term fi­nanc­ing at con­ces­sional rates has also been al­lowed on in­di­rect ex­ports. Thus, a yarn man­u­fac­turer, whose yarn is con­sumed in pro­duc­ing ex­ported fab­ric, will be en­ti­tled to low in­ter­est fi­nanc­ing fa­cil­ity.

The de­mand to re­move gas in­fra­struc­ture de­vel­op­ment sur­charge and lower the power rates has been re­jected. How­ever, gov­ern­ment’s new pack­age will lift the ban on pro­vid­ing new gas con­nec­tions.

The pack­age has been fi­nalised in con­sul­ta­tion with the tex­tile sec­tor, af­ter long de­lib­er­a­tions of over one year. The en­tire tex­tile value chain met the Prime Min­is­ter on Septem­ber 9, 2015 when the Prime Min­is­ter ac­knowl­edged the fair­ness of their griev­ances.

He promised that the is­sues will be re­solved within days. Other press­ing is­sues per­haps di­verted the at­ten­tion of the plan­ners, and only few of these is­sues have been par­tially re­solved. But it did not stop mill clo­sures and con­stant de­cline in ex­ports.

It im­pacted spin­ners and weavers more than the rest of the value chain. The millers con­tin­ued op­er­at­ing their fac­to­ries in loss, hop­ing that the an­nounced pack­age will stop the haem­or­rhag­ing.

Now, over 100 tex­tile mills across the coun­try are closed be­cause of sub­dued de­mand of ba­sic tex­tiles in for­eign mar­kets and lower rates pre­vail­ing in the do­mes­tic mar­ket due to over­sup­ply.

Al­most 75-100 mills are op­er­at­ing de­spite losses by eat­ing their re­serves or as­sets. Some of them are on the verge of col­lapse as they have ex­hausted all avail­able re­sources. They have been liv­ing on hope and de­spair since the last year.

Both tex­tile and non tex­tile ex­ports have been on con­stant de­cline dur­ing the past two years. How­ever, the de­cline in non tex­tile ex­ports was much higher than tex­tile ex­ports.

For the first time in Septem­ber 2016, the de­cline in tex­tile ex­ports went higher than the de­cline in non tex­tile ex­ports. The en­tire value chain of tex­tile is feel­ing the heat of re­duc­tion in for­eign or­ders.

The an­nounced pack­age will sup­port all five zero-rated sec­tors, in­clud­ing sur­gi­cal goods, leather, sports goods, and car­pets. The tex­tile sec­tor has promised $1 bil­lion in­crease in ex­ports in a year af­ter the pack­age has been im­ple­mented.

They also ap­prised the plan­ners that the po­ten­tial ex­port of an­other $3.5 bil­lion is linked to the re­vival of sick units. An­other ad­di­tional po­ten­tial of $11 bil­lion is also avail­able if the in­dus­try con­sumes the low value-added yarn and fab­ric lo­cally and con­vert them to ap­parel. Other sec­tors too will prob­a­bly be able to stop the de­cline in their ex­ports.

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