LAHORE: Expressing their views on Budget 2020-21, industrialists of textile and export oriented sector said no relief was announced for the textile industry in the federal budget while the industry is already on the verge of bankruptcy due to world wide economic recession as a result of Covid-19.
While talking to Business Recorder, Pakistan Apparel Forum leader Muhammad Javed Bilwani said there is nothing for textile sector so far, except an announcement on reduction on duties on the import of raw materials. Sales tax on local sales has been reduced to 12 percent from 14 percent.
"They had imposed 17 percent sales tax saying that they would bring local buyers into the tax network, but that area was not addressed," he said adding that trade was going to decline 40 to 50 percent in the world.
He said more industry would close in Pakistan and textile sector would go down. "Number of exporters is decreasing in Pakistan," he added.
Talking about automation of custom refunds, he said it had already been done. Actually, they were committed for automation of custom refunds in Jan 2019 but that has worked now.
The All Pakistan Textile Mills Association (APTMA) Punjab chairman Adil Bashir while talking to Business Recorder urged the government to announce a five-year export policy immediately in order to end the uncertainty.
Commenting on the federal budget 2020-21, APTMA chairman (Punjab) said the APTMA was expecting a reduction in Sales Tax to five percent if the government was not extending zero-rated status to the export-oriented industry to resolve the liquidity crunch due to stuck up refunds.
Only this one step would also bring the unorganized sector into the tax net, he added.
Furthermore, he said the textile industry was demanding a reduction in the turnover tax by half to the existing level of 1.5 percent and enable the industry to compete with regional competitors.
He said APTMA had also asked for the continuation of energy package for export industry to ensure the provision of electricity at 7.5 cents per kWh and RLNG at $6.5 per MMBTU in next budgetary year.
In the outgoing year, he said, the energy package has directly resulted in a volumetric increase of 32 percent of textiles over the last 18 months. This significant increase in volumes has come in a highly competitive international market where unit prices of products have fallen by as much as 26 percent, he added.
According to him, a lot of the major retail chains in the US and EU are filing for bankruptcy as a result of Covid-19 and the remaining ones are forcing up to 30 percent discounts and delayed shipping on orders already placed and in some cases shipped. By all accounts demand for textiles has crashed and is unlikely to attain the previous levels for the foreseeable future. Competition for the remaining market where price levels will be substantially low is likely to be intense.
Under the emerging circumstances, he said, continued provision of regionally competitive energy is absolutely essential if Pakistan is to continue to rely on reasonable export earnings to support its Balance of Payments.
He said Pakistan has a continuing balance of payments crisis and is being financed by local and international borrowing. More debt piling or borrowing is not a feasible solution. Therefore, this challenge can be overcome only by increasing exports, he stressed.
Adil mentioned that the government has clearly stated its intention to promote exports. The government specifically took action to overcome some disadvantages faced by Pakistani exporters such as the provision of regional competitive energy prices, which were otherwise higher than those of regional, and competitor countries.
In the 18-month period when competitive energy prices were implemented, he said Pakistan's textile exports increased in real (US$ terms), even though prices per unit values of exports were lower. So even though the external environment was not favourable, textile exporters were able to compete in international markets and achieved increased exports which would otherwise have fallen by over $3 billion per year necessitating increased borrowing.
APTMA chairman (Punjab) has expressed the hope that the government would announce the export policy without delay to attract fresh investment in the export-oriented sector, create jobs and put an end to the uncertainty about the continuity of government policies.
Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) chief coordinator Ijaz Khokhar said the budget speech was not understandable. Small and medium industry has been given no relief for industrialisation. "No revival of industry was discussed. No announcement regarding improvement of exports was made," he added.
He said zero-rated sales tax regime was demanded, but the budget did not discuss the sales tax at all. "It is not very encouraging. It was called a tax free budget, but they have increased other taxes. "Public will be affected as tax structure has been changed."
Khokhar said they were not happy with the budget. "No proposal of PRGMEA has been incorporated. I don't see any growth in exports," he said.
"Exports were not going to increase, but the government should have given taken steps to revive them. Our productivity will not increase from 50 to 60 percent. Competitiveness is not in our hand anymore."
If the government supports industry, liquidity would have improved, "now, unemployment will increase". How would they handle this is what matters now.
"We are going down in agriculture and cotton crop, but no preventive measure was announced, we have come to 8.5 million bales from 13 million bales," Khokhar said.
Karachi Cotton Brokers Association chairman Naseem Usman while talking to Business Recorder said the speech did not mention anything about textile and cotton, nothing was done regarding the unilateral demand of the sector regarding zero-rating of sales tax; utility tariff was not reduced.
"There has been no relief for the textile industry, ginners and farmers," Usman said, reminding that Finance Advisor Hafeez Shaikh in a meeting with ginners a few days back had said that Rs50 billion subsidies would be given to growers. "But the speech lacked that announcement."
Naseem ironically said people related to textile sector should invest in construction sector where there is no income tax, sales tax and with holding tax as well as no fear of paying monthly salaries and gratuity.
He also questioned the proposal to allocate Rs10 billion for managing the locust swarms, and said the damage caused by the locust was beyond Rs10 billion. "It is not a business friendly budget," he said.
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