Recommending power tariff at par with regional competitors, withdrawal of duty on coal, and zero-rating regime for textile industry, a parliamentary panel Wednesday called for taking tangible measures to boost the textile export. The Senate standing committee on textile industry which met here with Senator Mohsin Aziz, a textile tycoon, seemed perturbed over the deteriorating condition of the industry.
The panel recommended giving priority in gas availability and immediate refund of all outstanding claims of sales tax, DLTL and customs rebate to reduce the cost of doing business and make the industry compatible in the region. The industry pledged against the anticipated support by the government a minimum of 50 percent, ie, $4.5 billion rise in exports within the next three years which means a surplus current account and trade account of the country.
The committee met with Mohsin Aziz in the chair where serious concerns were shown over the dismal situations of textile industry in terms of continues decline in export despite getting the GSP plus status, decline in investment, shortage of gas and high power tariff and increasing cost of doing business. It was revealed that country textile exports declined by 17 percent in July 2015 as compared to the same period of last year. The committee recommended the government to liquidate the pending refunds to the textile exporters as early as possible. It further asked Federal Board of Revenue to release the sales tax and customs refunds which are pending for the last three years and account to more than a hundred billion rupees.
Chief Export FBR said that over Rs 11 billion are pending against different schemes. However by August 31, RPO has been issued against genuine claims. FBR official admitted shortage of funds and allocation of grants for clearing pending claims. The members were told that due to intermittent raise in the prices of raw materials, production inputs and utility tariffs, cost of doing business in Pakistan has escalated enormously rendering our exports uncompetitive in international market.
The committee said that cotton crop sales are about to begin and government should address the textile exporters' concerns immediately, otherwise the farmer of Pakistan would suffer terribly. Chairman All Pakistan Textile Mills Association (APTMA) S M Tanveer urged that government should provide direct subsidy to the growers instead of procurement one million bales. Otherwise middlemen would get benefits instead of growers, he added.
Muhammad Zubair Motiwala, Chairman Pakistan Apparel Forum (PAF) informed the committee that the World Bank expects global apparel market to reach $1.18 trillion by 2020 and $2.11 trillion by 2025. It also declares that Pakistan stands at highly disadvantages position in the International market. There is something terribly wrong in the policy and approach and prognosis by World Bank has proven this contention when competitors were enhancing their exports on a supersonic speed. Pakistan's share in the world market has dropped in last five years from 2.2 percent to 1.8 percent, he added. He said that an enabling environment and competitive structure needs to be provided to the textile industry of Pakistan to cater the dying industry which is at least growth level in the region. He said that textile industries of other countries in the region are growing fast because their governments support.
He said Pakistan compound growth rate textile and apparel export from 2005 to 2013 stands at 3.6 percent against 11.3 percent in India and 16.2 percent in Bangladesh. Further in Pakistan, value addition for every one million bale is $1.17 billion against $179 billion in India and $6 billion in Bangladesh. Pakistan electricity tariff is $0.15 kWh (highest among the 3) against $0.13 kWh in India and $0.09 kWh in Bangladesh. Pakistan's gas tariff is $6.27 per mmbtu (highest among the 3) against $4.66 in India and $1.86 mmbtu in Bangladesh. Pakistan's installed capacity utilization is less than 70 percent due to non-availability of energy on 24/7 basis against over 90 per both in India and Bangladesh. Pakistan's corporate tax rate is the highest at 34 percent against 25 percent in India and 27.5 percent in Bangladesh. Pakistan is the only country whose currency appreciated to the tune of 5 percent during 2013-2015 against 2.7 percent depreciated in India and 0.7 percent in Bangladesh, Motiwala added.
He said textile, which is a vital sector faces immense problems and hurdles which must be removed to pave the way for smooth and efficacious working of units in this sector and for enhancing boosting its exports in the best interests of the nation. Motiwala recommended that as a short term measure, "no payment no refund" system for exports to save futile exercise wasting precious time of FBR as well as exporters to declare textile sector zero rated at the manufacturing stage. Sales tax be collected at retail stage only that will ensure revenue on the goods arrived in the country through afghan transit trade, smuggling and under invoicing. Textile sector must be declared as separate head of account in gas tariff structure and imposition of GIDC must be stopped forthwith as we are already higher in tariff (as given above in the chart) compared to our competing countries. Tariff of power should be brought down at par with regional competitors declaring as separate head of account in tariff structure. The committee also expressed serious concerns over non-appointment of full-time minister for textile industry while saying that it seems that this sector is at the least priority of the government.
Usman Saifullah proposed that there should be an apex body of all textile association to plead its case more effectively before the government. Pakistan Textile Export Association Chairman Sohail Pasha demanded the withdrawal of 5 percent on coal import as it needs for the industry to run boiler and heater and it adds to their input cost. The committee unanimously agreed to bring back the zero rate mechanism and tax on local consumption.
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