The federal government is said to have put the special package for "under the weather" textile industry on ice due to strong opposition by the International Monetary Fund (IMF), well informed sources told Business Recorder. Senior officials of the Ministry of Textile Industry made no comment on the likelihood of the announcement of a package meant to support textile industry.
The All Pakistan Textile Mills Association (APTMA) Punjab is observing Wednesday (today) as 'black day' against what they perceive is a delay in the announcement of a special package that the government has committed would be announced by end September. Sources in APTMA confirmed to Business Recorder that the government had agreed to announce a package for textile sector after two-day parlays, which was expected to be announced by the Prime Minister.
"There is complete silence from the government side on the package. We are unaware why the government is not responding to APTMA's calls," said one textile sector giant. The IMF reportedly expressed extreme reservations at the government's intent to extend any financial benefit to the textile sector. This view is strengthened by the recent comment by IMF Mission chief, Harald Finger, in a teleconference with Islamabad-based journalists that the Fund would have a discussion with the government on the planned package for textile sector during the ninth review to be held in Dubai by the end of this month.
Finance Ministry has already directed all the concerned Ministries to submit briefs on the targets agreed with the IMF along with progress. According to sources, the IMF has serious reservations on the agriculture package of Rs 342 billion announced by the federal government. However, Finance Minister, Senator Ishaq Dar reportedly clarified to the Fund that most of the incentives in the agriculture package were part of the federal budget.
"The government had to extend package to textile sector because of a declining trend in textile-related exports. However, textile exports have depicted growth during the last two months that's why the government may not be interested in extending any package," said an official of Ministry of Textile Industry on condition of anonymity. He, however, acknowledged that the IMF may also be a hurdle in the announcement of the package.
Textile sector has claimed that Pakistan's exports are burdened with taxes and levies which are as follows; (i) Rs 72 billion surcharges on electricity ie tariff rationalisation surcharge, Neelum Jehlum surcharge, fuel component etc; (ii) Rs 38 billion gas infrastructure development cess ; and (iii) Rs 60 billion innovative taxes on consumption/ production and exports (turnover tax, infrastructure cess, transaction tax, Export Development Surcharge, Withholding tax etc) APTMA argues that export oriented industry cannot sustain the burden of Rs 170 billion (12 per cent) of exports) in the form of taxes and surcharges.
Recently, APTMA revealed to the media that in a presentation to the federal government 10 demands were put forth - demands that would enable the sector to again compete internationally. These demands include: (i) withdrawal of electricity surcharge; (ii) removal of gas infrastructure development cess (GIDC); (iii) zero rating of local taxes on textile exports; (iv) adding of spinning industry in the long-term finance facility (LTFF); (v) three percent tax on unregistered buyers instead of two percent; (vi) rebate on focus market exports; (vii) strengthening of domestic market; (viii) duty on import of yarns and fabric; (ix) clearance of pending claims by the FBR; and (x) direct subsidy to cotton growers and farmers.
Addressing a press conference on Sunday, Chairman APTMA Punjab, Amir Fayaz said the Association had been conveying their reservations and grievances to the government for the last many months, but the government has done nothing besides offering comforting statements.
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