APTMA pro­pos­als

The Pak Banker - - FRONT PAGE -

With bud­get time near­ing, All Pak­istan Tex­tile Mills As­so­ci­a­tion has come up with a list of bud­get pro­pos­als for re­vival of the sec­tor. An im­por­tant de­mand is re­duc­tion in power tar­iff from Rs11/kWh to Rs7/kWh. The main bone of con­tention in this re­gard is the Rs3.63/kWh tar­iff equal­iza­tion sur­charge im­posed by the fed­eral gov­ern­ment to cover up for in­ef­fi­cien­cies of the power sec­tor.

How­ever, the gov­ern­ment's fis­cal space is con­strained at the mo­ment and Nepra has also al­lowed the con­tin­ued im­po­si­tion of these sur­charges. The reg­u­la­tor cited the gov­ern­ment's com­mit­ment to the In­ter­na­tional Mon­e­tary Fund (IMF) as a rea­son for al­low­ing the sur­charges to con­tinue.

An­other pro­posal is for a uni­form gas price to be adopted across the coun­try. Pun­jab-based in­dus­try is now get­ting RLNG at al­most Rs1300/mmbtu whereas the rate is half for other prov­inces. But ex­perts opine that given the first right of use of nat­u­ral re­sources granted un­der the Con­sti­tu­tion and the ac­com­pa­ny­ing po­lit­i­cal re­al­i­ties, im­ple­ment­ing a weighted av­er­age rate for gas will be dif­fi­cult. Even if the gov­ern­ment does find a way to is­sue a unan­i­mous gas price, this will re­sult in a sub­sidy of roughly Rs37 bil­lion. Again, given the macroe­co­nomic chal­lenges and the twin deficits hov­er­ing over the economy, grant­ing this sub­sidy will be a dif­fi­cult task to man­age. How­ever, if the cost of pro­duc­tion is to be brought down in or­der to make the do­mes­tic in­dus­try cost com­pet­i­tive, bring­ing down en­ergy costs will have to be man­aged one way or the other.

APTMA has also pro­posed that no cus­tom duty and sales tax be im­posed on the import of cot­ton. This makes sense given the poor per­for­mance of the cot­ton crop over the past sev­eral years re­sult­ing in short­age of the raw ma­te­rial for tex­tile firms. The as­so­ci­a­tion wants the gov­ern­ment to re­duce the in­put cost of farm­ers in­stead, while help­ing them in­crease their yield through the pro­vi­sion of qual­ity seeds. Sim­i­larly, the tex­tile rep­re­sen­ta­tive body also de­mands that the cus­tom duty on the import of polyester sta­ple fiber (PSF) be abol­ished. Given the over­whelm­ing shift of global con­sumer pref­er­ences to­wards man­made fibers (MMFs), this will help the lo­cal in­dus­try re­cal­i­brate its prod­uct range from over-re­liance on pre­dom­i­nantly cot­ton based prod­ucts to MMFs. APTMA notes that even if the 7 per­cent cus­toms duty is re­moved, there will still be an anti-dump­ing duty of more than 10 per­cent for pro­tec­tion of lo­cal PSF man­u­fac­tur­ers. Other pro­pos­als in­clude the pay­ment of pend­ing duty draw­backs and pend­ing sales tax re­funds, re­duc­tion in cor­po­rate tax rate, zero rat­ing of coal, heavy fuel oil (HFO) and diesel, re­moval on in­put tax on pack­ing ma­te­rial and amend­ment to the long-term fi­nanc­ing fa­cil­ity (LTFF).

The Rs180 bil­lion Prime Min­is­ter In­cen­tive Pack­age for the tex­tile sec­tor was launched last year. Yet, the im­pact tex­tile stake­hold­ers had hoped for has been miss­ing mainly due to patchy im­ple­men­ta­tion. In its bud­get pro­pos­als, the All Pak­istan Tex­tile Mills As­so­ci­a­tion (APTMA) has de­manded prompt pay­ment of duty draw­backs and pend­ing sales tax re­funds. The list of bud­get pro­pos­als also in­cludes re­duc­ing the cor­po­rate tax rate from 30 per­cent to 25 per­cent or at the very least bring­ing it down for the tex­tile sec­tor. Cit­ing the pre­vi­ous prece­dent of grant­ing zero per­cent turnover tax for rice mills in FY16's bud­get due to their fi­nan­cial woes, APTMA would like the gov­ern­ment to give a sim­i­lar treat­ment to tex­tile firms. APTMA also wants the gov­ern­ment to en­cour­age value ad­di­tion by amend­ing the long term fi­nanc­ing fa­cil­ity (LTFF). All these de­mands are log­i­cal but it re­mains to be seen how many of these bud­get pro­pos­als will ac­tu­ally be adopted by the gov­ern­ment.

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