Import of Paraxylene from India: Cabinet refuses to grant one-time exemption to company

The federal cabinet has refused to grant one-time exemption to M/s Lotte Chemicals Pakistan Ltd to import Paraxylene from India, after serious differences were witnessed between Commerce Ministry and Prime Minister's Advisor on Commerce, Industries and Production and Investment, Abdul Razak Dawood over the proposal, well informed sources told Business Recorder.

Commerce Division informed that M/s Lotte Chemical Pakistan Ltd. had approached them stating that have entered into a contract of importing Paraxylene from India which is raw material for Purified Terapathalic Acid (PTA). The raw material is not produced locally and hence, it needs to be imported from regional producers of Paraxylene.

India is one of the producers and the company has a contract with M/s Reliance (India) for a total supply of 140,000 MT of Paraxylene of which 82,500 MT has already been imported. Hence, they have requested for permission to import 40,000 MT of Paraxylene from India.

The sources said, owing to current suspension of trade with India, a summary was sent to the Prime Minister who is also Minister in-Charge, Ministry of Commerce to seek his approval for allowing M/s Lotte Chemicals Pakistan Ltd. to import Paraxylene from India. Subsequently, the Prime Minister's office initiated that the Prime Minister has desired that the matter should be placed before the federal cabinet.

Following instructions from Prime Minister office, a summary was presented in the federal cabinet meeting on January 28, 2020, which deferred the decision with the direction that the case will be resubmitted before the cabinet after exploring all options/ alternatives. After obtaining response alternatives, the case was re-submitted to the Prime Minister who has desired that the matter shall again be placed before the federal cabinet.

The cabinet was further apprised that according to M/s Lotte Chemical Pakistan Ltd., among the regional exporters, countries which have surplus Paraxylene are willing to ship it to Pakistan, include Saudi Arabia, Kuwait, India and Iran. These producers sell Paraxylene in the market based on annual contractual commitments.

Commerce Ministry further informed that previously, M/s Lotte Chemical had informed that they used to have contracts with all the four suppliers. However, due to the US sanctions, they were compelled to discontinue import of Paraxylene from Iran and therefore, M/s Lotte Chemical increased its import from the remaining three suppliers. After the recent suspension of trade with India, the company made extensive efforts to negotiate with other two suppliers, i.e. Kuwait and Saudi Arabia, however, those suppliers do not have any surplus / additional supplies available to export to M/s Lotte Chemical as they are fully committee under their 2019-20 contracts with other customers. Non -availability of Paraxylene has led to operational problems and the plant has been shut down several times.

M/s Lotte Chemical, which contributes to 60 per cent of domestic market of PTA, informed that in case the domestic PTA industry is not able to operate due to non-availability of Paraxylene, the downstream industries like Polyester Filament Yarn(PFY),Polyester Staple Fibre (PSF) and PET bottle will be forced to import PTa, which will result in the following losses to Pakistan ;(i) in the absence of imported Paraxylene, the only PTA plant will shut down causing unemployment and huge loss to the investment made in PTA production ;(ii) without indigenous PTA, the downstream industry will be forced to pay higher prices to foreign suppliers as they will take advantage of the situation and charge premiums. This may make downstream industry, especially textiles, uncompetitive in the export market;(iii) Pakistan's ability to attract investment for Naphtha Cracker shall diminish due to plant closure as this requires significant quantity of Paraxylene and ;(iv) Pakistan will lose foreign exchange through foreign imports over $ 100 million which is currently being provided by the domestic PTA industry through import substitution.

The summary submitted to the Cabinet says that to avoid shutdown of downstream industry of PTA, M/s Lotte Chemicals Pakistan Ltd. requested for grant of one time permission to import 40,000 MT Paraxylene from India.

Advisor to Prime Minister on Commerce, Industries and Production and Investment, Abdul Razak Dawood supported the request of M/s Lotte Chemical Pakistan Ltd. However, Secretary Commerce, Sardar Ahmed Nawaz Sukhera was of the view that in the light of the Cabinet's earlier decisions, the request of M/s Lotte Chemicals may be regretted as any one-time permission become precedent for the importers, and may invited litigation on the grounds of discrimination.

The cabinet was informed that another industry has recently submitted similar request to the Ministry of Commerce which is under process. During the last fiscal year, Pakistan's import of India amounted to $ 1.6 billion. However, suspension of trade with India has obviously impacted adversely all the importers and users of goods.

Commerce Ministry further informed the cabinet that since the government has taken the decision for suspension of strategic reasons, there should not be any one-time exemption for any enterprise on the basis of size or source of investment.

Furthermore, the cabinet has also strictly implemented its decision about trade with India and exceptions have only been made in the case of therapeutic drugs, Polio vaccines and makers. Therefore, Secretary Commerce was of the view that, in pursuance of the cabinet's directions in the matter, the import might be asked to source these raw materials from other countries.

The sources said, power to allow import in relaxation of any prohibition or restriction, for reasons to be recorded, under Para 20 of the Import Policy Order(IPO), 2016 rests with the Minster for Commerce with the approval of Prime Minister.

According to sources, when the summary came under consideration in the cabinet, the members i.e. Minister for Planning, Development & Special Initiatives, Asad Umar, Minister for Railways, Sheikh Rashid Ahmed and Minister for Human Rights, Dr Shireen Mazari strongly opposed granting the one-time exemption in the wake of the violence against Muslim community in India.

It was highlighted that Hindu nationalists perpetrated atrocities against the Muslims by destroying their homes and business, while policy remained a silent spectator. Under these circumstances resuming trade with India from Pakistani soil would not go down well with the people of Kashmir, Muslim community in India and the people of Pakistan. It was suggested that M/s Lotte Chemicals should be advised to procure Paraxylene from alternate sources, which they eventually would have to do since they were only seeking one-time exemption.

Referring to earlier decision of the Cabinet related to import of life saving drugs, a member expressed apprehension that the decision of the cabinet was not being implemented in letter and spirit and besides the life-saving drugs other pharmaceutical were also being allowed to be imported from India. SAPM on National Health Services, Regulation and Coordination Division ( NHSR&C) clarified that Cabinet had allowed import of therapeutic drugs and currently around 40 per cent of Active Pharmaceutical Ingredients(APIs) of therapeutic drugs were being imported from India. The cabinet members desired that the details and quantity of drugs currently being imported from India should be presented before the cabinet.

After detailed discussion, the cabinet did not approve the proposal of Commerce Ministry to allow one-time exemption of import from India. The cabinet further directed National Health Services, Regulation and Coordination Division to present the complete list of drugs currently being imported from India, in the next cabinet meeting.