The federal government is to constitute a committee comprising all the concerned stakeholders to finalise recommendations for continuation of exports incentives package and tariff rationalisation proposals which remained unattended in the federal budget 2018-19, well-informed sources told Business Recorder.
Prime Minister, Shahid Khaqan Abbasi, sources added, wants the continuation of exports package for a further three years but no such decision was taken at the time of the budget announcement which disappointed exporters. Finance Minister, Dr Miftah Ismail, sources said, argued that depreciation of the currency has given a push to exports and no other incentive is needed for this purpose.
However, the counter argument is that the rupee depreciation will result in a 4 to 5 per cent increase in exports which is not enough to narrow the trade deficit and that the continuation of the exports package is necessary with some modification ie ( limited only to value added sector).
The sources said, three things - currency, utility and input tariffs - are key factors behind increase in costs of production and making our export items costlier compared to Pakistan''''s competitors. "Commerce Ministry has urged the top decision makers to continue exports package even with reduced rates besides tariff rationalisation which has increased input costs manifold due to abrupt changes," said an official on condition of anonymity.
In an interactive session recently organised by the Commerce Division, a new concept of tariff for Pakistan industry and trade was introduced.
The new concept was shared with trade bodies, trade professional associations and bureaucrats according to which a proposal will be submitted to the cabinet aimed at moving tariff management away from FBR which is using tariff as a revenue generation tool.
In his presentation, a senior official of Commerce Division shared data to support his contention that use of tariff as a revenue generation measure has discouraged exports and played a major role in widening the trade gap.
An impression is being given that trade figures show that 2,747 trade lines attracted a 3 percent duty rate. Revenue generated from imports on these tariff lines was Rs 24.2 million in 2017. An additional Rs 11.1 million was generated from 1,096 lines that attracted 11 percent tariff rate during the same year.
These two slabs accounted for a cumulative Rs 35 billion revenue for FBR. Regulatory duty was over and above these figures. Total imports of the country were slightly above $ 44.6 billion during the same period. Unfortunately, these tariff lines represent the core of industrial base. The 3 percent tariff is levied on raw materials while the 11 percent tariff is attracted by machinery largely being imported by industrial undertakings. Raw materials attracted 0 percent duty in 2014.
The Ministry of Industries and Production (MoI&P) made a very compelling case by stating that unless the basic philosophy of tariff management was corrected the export performance cannot be improved. It was argued that the entire tariff structure, as being managed presently, is working towards creating a bias against exports. Commerce Division further noted that the proposed National Tariff Policy will be discussed at a national level and a schedule of consultative meetings will be announced within a month or so.
According to sources, the proposed National Tariff Policy will be submitted to the federal cabinet despite resistance by the FBR which is using tariff as a revenue source.
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