All Pakistan Textile Manufacturers Association (Aptma) is lobbying to allow 15 percent regulatory duty on export of cotton yarn to lapse on Monday (July 26) as any extension will distort the market.
"We request the government to allow 15 per RD imposed on yarn since May 13, 2010 to lapse on July 26. This will allow the demand and supply to govern the prices of all raw materials and end products and the market would find its own equilibrium at which all stakeholders would benefit and contribute positively to economic development," said Aptma Chairman Shahzad Ahmed, in a letter to Finance Minister Dr Abdul Hafeez Sheikh.
Aptma which was eyeball to eyeball with garments manufacturers a couple of months ago is of the view that any kind of intervention by the government will only serve to distort the market and no sector can derive any benefit from this.
"Since the imposition of duty, our member mills had stopped importing cotton because of uncertainty which resulted in serious shortages of raw material. Prices of raw cotton started to rise affecting the viability of the spinning mills and many mills had to close down," he added.
The association has admitted that pressure on cotton prices has lessened before the advent of the new crop and this would help mills restart functioning and increase availability of yarn for the value added sector. Aptma insists that RD must be allowed to lapse on 26 July as per the government's commitment and a clear announcement to this effect should be made.
This will allow the prices to stabilise and the value added sector could plan its export commitments accordingly. Also Pakistan's export markets would be assured that government was sincere and would help Aptma members to honour their contracts. The Association argues that a free market is also vital to harvest new cotton crop as healthy mills with unrestricted outlets are able to buy cotton at international levels and offer good return to the farmers for their produce.
"It is impossible for mills to pay international prices for cotton and sell yarn at a 15 percent price disadvantage. In view of an expected bumper crop, farmers need to be assured that their harvest will have a ready market," Ahmed further added.
Regulatory duty is continuously impacting on Pakistan's share and countries such as Vietnam and India are making major gains. Indian mills could pre-RD not challenge Pakistani mills because our mills are more competitive and give a better price, but after the RD the Indians have made major inroads into Pakistan's traditional markets, claims Aptma.
"Our industry has also developed high value yarns after years of efforts and these products cannot afford any restriction on their exports as they have no domestic buyers. The value added sector must realise that they are selling their products into the global village and international prices of cotton will determine their product pricing. So to ask for restrictions is unfair and detrimental to the national interest," Ahmed maintained.
Moreover, the association argues that import of all yarns is duty free which should keep the local yarn prices in check through the market mechanism. Aptma has urged the Finance Ministry to restore free market mechanism, which has been in vogue for last 15 years and proved to be a success.
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