Textile industry has termed the withdrawal of zero rating status of export-oriented sectors, high energy cost and cotton shortage as major hindrances in increasing the country's exports.
A delegation of All Pakistan Textile Mills Association met Prime Minister Imran Khan and apprised him of the major issues being faced by the industry as well as hurdles in enhancing exports.
The delegation gave a presentation, a copy of which is available with Business Recorder and apprised Prime Minister that the production cycle requires 185 days to complete. The Federal Board of Revenue (FBR) collects sales tax on value added items at each stage but the refunds are only available after export and this is how the FBR is overstating its revenue collection by Rs22 billion per month which is actually refundable.
Textile industry said FBR collected Rs108 billion in last five months till November 2019 of the ongoing financial year 2019-20 out of which it only paid Rs15 billion in refunds putting industry in hot waters as that had triggered a huge liquidity crisis. Owing to this fact, the industry is unable to meet export orders and cannot expand its operations to create exports surplus. The industry pleaded for restoration of zero rating status for the exports-oriented sectors.
APTMA further raised the issue of charging quarterly adjustments of over Rs2 per unit more from textile industry other than the already agreed 7.5 cents per unit in the meeting. APTMA also asked for continuation of the energy package for another five years. Under an energy package the export industry is being extended power tariff of 7.5 cents per unit and gas tariff at $6.5 per MMBTU.
Textile industry stated textile exports will not increase as the country faces a cotton deficit of five million bales. Decrease in cotton acreage, per hectare yield and imprudent government policies have taken a heavy toll on cotton production.
Over the last five years cotton production has decreased from 13.86 million bales to 10.84 million bales, witnessing a decrease of 22pc which has caused a loss of almost two percent of total GDP. In fiscal year 2020, crop size is expected to be around 8.5 million bales only and yield is expected to decline from over 800 kg/hec to 550 kg/hec.
The textile industry will have to import five million bales to meet the requirements in the ongoing financial year. Cotton should not be subjected to any sort of import duties around the year, said APTMA.
APTMA has suggested to the government to amend the Seed Act and formulate new rules and asked for legislating the Plant Breeder's Act and its effective implementation. The APTMA also stressed for innovation to acquire advanced seed R&D technology.
According to APTMA adequate finance and credit availability is vital for growth and enhancement of any industry. Pakistani textile industry has been facing financial constraints over the last decade which has led to fall in exports, decreased industrial production, and low investment in the sector. Over the last one year, the interest rate has also increased from 5.75 percent to 13.25 percent, further restraining investment in the sector, along with increased working capital requirement owing to recent devaluation of currency.
APTMA also suggested that public-private and international collaboration is required to acquire advanced seed R&D technology for quality seed development. It also asked for such seed technology that effectively controls weeds and insects. APTMA also said the cotton cess collected from textile industry should be allocated to the development of cotton seed.
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