Panel for textile industry

Textile industry of the country has been in great trouble in the recent past and demanding various kinds of incentives to resolve its problems. In order to be well acquainted with its issues and put them before the government, the National Assembly Standing Committee on Textile Industry led by MNA Khwaja Ghulam Koreja met with the value-added textile sector's representatives on 27th January, 2016, to discuss their demands. M.J. Bilwani, Chief Co-ordinator, Value Added Textile Association and Chairman, Pakistan Apparel Forum informed the meeting that the value-added textile sector contributes dollar 11.43 billion (46 percent of total exports and 85 percent of total textile exports) to foreign exchange earning of the country and generates 42 percent of the total employment (including women workers). In 1990, exports from Pakistan stood at dollar 4.9 billion, from Bangladesh at dollar 1.6 billion and from India at dollar 16.6 billion and rose to dollar 23.8 billion from Pakistan, dollar 30.1 billion from Bangladesh and dollar 310.3 billion from India in 2015, indicating clearly that Pakistan had lagged behind in the pace of growth in exports. In 2015, cotton production in Pakistan decreased by as much as 33.51 percent. It is therefore advisable that to support cotton growers, government should provide free of cost cotton seeds to farmers and purchase cotton from growers at international prices. During budget meetings, textile industry had warned the government that vital exports will plunge by around 20 percent if sales tax on exports is not withdrawn and cost of doing business is not brought at par with those of regional competitors. However, there was no response from the government and exports declined despite the GSP+ opportunity. The government should also ensure immediate payment of outstanding claims of sales tax, duty drawback and, refund of local taxes paid by the export sector. Customs' rebate should be paid along with export proceeds' realisation. The practice of "no payment, no refund" should be introduced to reduce the workload of the FBR and spare the export sector from wasting time in getting refunds. Power and gas tariffs should be at par with regional competitors' and priority should be given to export-oriented industry in uninterrupted supply of all utilities. The National Assembly's Standing Committee on Textile Industry was so much convinced about the case of textile industry that it showed full support to its demands.
We feel that the demands of the textile industry need to be considered carefully with a view to resolving them as far as possible, particularly when the sector is so important to the economy of the country and the Standing Committee on textile industry is also in total agreement with their demands. It may be reiterated that textiles is the most important manufacturing sector of Pakistan and has the longest production chain, with inherent potential for value addition at each stage of processing, from ginning, spinning, fabric, dyeing and finishing to made-ups and garments. The sector contributes nearly one-fourth of industrial value addition and provides employment to 40 percent of industrial labour force. Over 55 percent of country's exports earnings are contributed by cotton group alone. Contrary to the intentions of the policy-makers, country's export base and markets continue to be extremely narrow. Moreover, exports have been stagnant at around dollar 24-25 billion for the last few years, with even declining trends witnessed in the recent period. All these factors call for a vigorous policy to increase exports with the needed policy input from exporters who really work in the field. Suggestions from exporters definitely deserve due attention.
Coming to the demands of the Value- Added Textile Association, their request for immediate refund of all outstanding claims of sales tax, drawback on local taxes and levies and customs rebate is fully justified. The government has of course no right to withhold their claims for showing a better picture of fiscal position if their claims meet the standard criteria. In fact, "no payment no refund" system would be preferable to improve the liquidity position of the exporters. Availability of uninterrupted supply of gas and electricity at cheap rates could only be considered if the supply of these inputs is adequate and the utilities could bear the cost of such a proposal. Given the budgetary constraints of the government, the proposal for free of cost cotton seed and purchase of cotton from growers at international prices is impossible to implement. In fact, if such a proposal is considered seriously, other sectors of the economy would also ask for similar incentives and concessions. Besides, exporters need to be asked why they are generally silent and not prepared to contribute more to the national exchequer when the going is good and they are making huge profits. Lastly, it is incomprehensible that exporters have not raised the issue of depreciation of the rupee at the meeting when proper adjustment in the exchange rate is the most potent instrument of export expansion.