Improvement in ''textile sector confidence'' attributed to export incentive package

Prime Minister Shahid Khaqan Abbasi and his economic team have improved textile sector confidence through the export incentive package and allowing rupee depreciation. This was the consensus among industry stakeholders as well as government officials who told Business Recorder that the Abbasi administration has taken some good initiatives and given more focus to the export-oriented sectors in comparison to the Nawaz Sharif administration.
Textile exports rose to $1.132 billion in December 2017 from $1.028 billion in December 2016 ie by around 10 percent. Textile sector exports during the first six months of the current fiscal year were $6.642 billion, 8.07 percent up from $6.146 billion for July-December 2016.
Exporters linked the increase in exports with flow of cash under the PM''s incentives package, payment of sales tax refunds as well as depreciation of local currency, which improved their liquidity situation. Soon after the appointment of incumbent Prime Minister, the Economic Co-ordination Committee of the cabinet amended the PM Package to further facilitate the textile sector. According to the amended package, 50 percent of the rate of drawback of local taxes and levies was to be provided, without condition of increment, and the remaining 50 percent to be provided if the exporter achieves an increase of 10 percent or more in exports during fiscal year 2017-18 as compared to fiscal year 2016-17.
Further an additional two percent was allowed for exports to nontraditional markets - Africa, Latin America, non- EU countries, Commonwealth of Independent States and Oceania. Official sources revealed that after the package revision, sales tax refund payments have improved and so far Rs 16.5 billion has been disbursed under the PM''s export incentive package. The government has also released around Rs 3 billion for non-textile sectors covered in the PM package, sources added.
Further, the government introduced major measures to facilitate duty drawback of local taxes, including revolving limit to be provided by Finance Division to SBP, and speedy verification of claims through Federal Board of Revenue''s (FBR) electronic data access to the SBP. The SBP would request the Finance Division for further release of funds once the limit is utilized up to 80 percent. The authorized dealers will credit the amount of claims received from SBP within twenty four (24) hours to the industrial unit. The FBR will provide electronic data to SBP for expeditious verification/scrutiny of claims.
Talking to Business Recorder Javed Balvani Chairman Pakistan Apparel Forum said that exporters met PM Abbasi last week where a number of proposals were submitted to enhance exports. PM assured the exporters that government will facilitate them in reducing the cost of doing business and early release of refund claims.
Balvani said that PM was requested to bring down the tariff on gas, power and water at par with regional countries to make them competitive in the international market, as it will benefit the entire manufacturing chain. Further, the PM was requested to declare textile export sector as a separate head of account in tariff structure of gas, power and water. PM reportedly agreed with the proposal and assured the exporters that the government is committed to facilitating them.
Although zero-rating has been continued yet exporters recommend that this regime should be converted/transformed into an Act and not implemented through issuance of an SRO. This would provide the required confidence to the stakeholders. The PM was requested for immediate disbursement of exporters'' refunds - sales tax, DLTL, customs, rebate, withholding tax. All custom rebate claims are settled and paid through State Bank of Pakistan at the time of realization and payment of export proceeds. Balvani said that PM had agreed to expedite the process for disbursement of refunds claims.
All Pakistan Textile Mills Association (APTMA) representatives said energy cost was more than 30 percent of the total conversion cost in spinning, weaving and processing industries. Industrial gas tariff in Pakistan is about 100 percent whereas electricity tariff is about 50 percent higher than their regional competitors. Electricity is available at Rs 10.5/kwh for the industry in Pakistan as compared to Rs 7/kwh in other regional countries including Bangladesh. Further, gas is available at Rs 1,000/MMBTU in Pakistan against Rs 400 in Bangladesh. They urged the government to slash energy prices to reduce the cost of doing business.