The Economic Co-ordination Committee (ECC) of the Cabinet on Tuesday raised duty on import of several items, and approved availability plan for 0.3 million tons additional refined sugar to stabilise prices. With the meeting presided over by the Advisor to Prime Minister on Finance, Shaukat Tarin, the committee turned down the proposal of Commerce Ministry regarding imposition of 25 percent duty on export of molasses.
It also decided that regulatory duty (RD) would not be levied on items imported under free trade agreements (FTAs) and preferential trade agreements (PTAs). "The ECC reviewed sugar prices, availability of its stock, and probable domestic consumption, and directed that TCP (should) import 0.2 million tons of refined sugar, breaking up the import process in manageable tendering size, and ensure that overall market pricing of sugar at USC outlets is maintained at Rs 38 per kg," said an official statement.
Analysts are of the view that this decision will deprive the nation of at least $80-100 million precious foreign exchange, which could have been saved with the export of raw sugar in December, but for the opposition of the five top policy makers ie Minister for Agriculture, Minister for Industries, Minister for Privatisation, Deputy Chairman Planning Commission and Minister for Water and Power.
The ECC also advised TCP to offload 0.1 million tons sugar from its own stocks through USC outlets to supplement domestic market needs. According to details exclusively made available to Business Recorder, the government imposed RD on 379 non-essential and luxury items in July, 2008 for the purpose of slowing down imports to reduce the trade deficit.
As a result of this duty the import value of these 379 items has decreased to almost 40 percent during the period July-December, 2008 as compared to corresponding period of last year which has also benefited the local industry. Sources said that various local industries had approached the government that in the wake of excessive inflow of imports from cheaper sources their viability is at risk and they have requested that regulatory duty be levied on the import of the products produced by them.
Adviser to Prime Minister on Finance had constituted a committee comprising of Chairman, FBR, Secretary, Ministry of Commerce and Secretary Ministry of Industries to examine the representations of various industries and recommend specified items for levy of regulatory duty. The committee examined the issues raised by different industries on detergents, paper and paper hoard, float glass, ceramic tiles, flat rolled products of iron and steel, stainless steel and glass ware:
(I) DETERGENTS: The committee found that as against the market demand of 230,000 tons of detergents, the local detergent industry is producing around 175,000 tons and there is demand-supply gap of about 55,000 tons only. Therefore, keeping this in view the committee did not recommend levy of regulatory duty on import of detergents as it will hurt the consumer. The ECC deferred this proposal for next meeting.
(II) FLOAT GLASS: National demand for sheet/float glass is around 8 million square metres whereas the local production of glass is around 5.5 million sqr metres, exhibiting a supply-demand gap of around 2.5 million sqr metres. Hence, the committee did not agree to levy regulatory duty on import of glass, owing to the reason that it will hurt local construction industry.
The committee further deliberated upon issue of levy of regulatory duty on paper and paperboard, ceramic tiles and flat rolled products of iron and steel and as a result of the deliberations of the committee submitted following proposals for the consideration of the ECC:
(I) CERAMIC TILES: Regulatory duty @ 15 percent was earlier levied on glazed ceramic tiles. However, unglazed ceramic tiles were not subjected to regulatory duty. The committee observed that this might be a source of possible misdeclaration and, in order to obviate any such chances, it recommended that regulatory duty @ 15 percent may be levied on unglazed ceramic tiles (PCT Code 6907.1000 and 6907.9000).
(II) FLAT ROLLED STEEL PRODUCTS: The prices of flat rolled products of iron and steel (HRC, CRC & GP) have recently decreased drastically in the international market. However, the values determined for the assessment of customs duties are higher than the prevalent market prices because these are on the basis of weighted average price for 90 days as reported in the London Metal Bulletin (LMB) as per the following formula which is in vogue since 2003.
This has been contested by the importers and they have demanded that their declared values may be accepted for the levy of duty and taxes. In order to mitigate the grievances of the importers and to make the valuation of iron and steel products reflective of the market prices the Valuation of GP sheets, CRC and HRC may be determined on the basis of current LMB prices.
The committee examined this issue in detail and found that the values determined in the light of proposed formula are on the lower side as compared to those determined vide the Valuation Ruling. These lower values may invite criticism from Pakistan Steel Mills which may be addressed by levy of regulatory duty.
Therefore, the committee proposed that 10 percent regulatory duty may be levied on flat rolled products of iron and steel (PCT code 72.08, 72.09, 72.10, 72.11, 72.12, 72.13) to save the local industry and the customs valuation of HRC, RC, GP (flat rolled products of steel) may be linked with values reported in London Metal Bulletin (LMB).
This will remove human indulgence and make the whole procedure transparent and responsive to international market changes besides being more close to transaction value concept. The ECC approved the proposal.
(III) PAPERBOARD AND SACK KRAFT PAPER: As the international market is facing recession, therefore, the prices of paperboard and sack kraft paper has shown considerable decline. The local industry is facing threat in the shape of cheaper imports of paperboard products and sack kraft paper. Therefore, in order to protect the local industry the committee proposed that the regulatory duty@15 percent may be levied on various varieties of Paperboard (PCT code 4810.9200 and 4810.9900) and sack kraft paper (PCT Code 4804.2100, 4804.2900 and 4808.2000). The ECC approved the proposal.
The ECC, however, approved exemption of RD on imports of potatoes by international franchise food chains. ECC had levied 25 percent RD on import of ware potatoes. According to FBR, this measure would impede the flow of foreign direct investment (FDI) in retail food chain business like KFC and MacDonald''s etc.
The regulatory duty @ 25 percent will remain leviable on all other imports of ware potatoes for sale in the market for general public or for food chains other than mentioned above. It means that the general public will procure potatoes at higher prices whereas food franchises will pay no tax on this commodity. This type of economics has been criticised by some of the stakeholders. The ECC reviewed cases recommended by the anomalies committee and deferred increase in duty on stainless steel sheets but all other proposals were approved.
THE PROPOSALS ARE:
(A) CHANGES IN RATES OF DUTY: 2 ply viscose twisted yarn (PCT Code 5403.3200) is subject to 5 percent customs duty whereas its raw material, un-twisted 1 ply viscose yarn (PCT Code 5403.3100), is subject to 7 percent customs duty. Therefore, in order to resolve this issue the Committee recommended that the duty on viscose yarn 1 ply (PCT code 5403.3100) may be reduced from 7 percent to 5 percent.
The committee recommended that the duty on cryogenic tanks (PCT code 7326.9090) may be reduced from 20 percent to 5 percent being essential for storage of gases at very low temperature and due to the fact that such tanks are not produced locally.
Ceramic ware (PCT code 69.11) are liable to duty @ 35 percent customs duty plus 15 percent RD, whereas glassware (PCT code 70.13) are importable @ 25 percent customs duty only which may result in misdeclaration. Therefore, the committee proposed that the regulatory duty @ 25 percent may be levied on glassware (PCT code 70.13) to bring it at par with 50 percent rate of duty on ceramic ware.
Sources said that pigment thickener (PCT code 3906.9030) is subject to zero percent customs duty, whereas acrylic thickener (3906.9040) is liable to 10 percent customs duty. Both thickeners are raw materials for textile processing industry and it is hard to differentiate between the two at the import stage which may lead to misdeclaration. Therefore, in order to obviate any such chance the committee recommended that regulatory duty @ 10 percent may be levied on pigment thickener (PCT code 3906.9030).
AHN Steel is manufacturer of stainless steel sheets having width from 500 mm to 750 mm and of thickness from 0.5 mm to 4.75 mm. The raw materials used for the manufacturing of these sheets are importable @ 5 percent customs duty whereas finished product ie stainless steel sheets is importable @ zero percent customs duty under SRO 567(I)/2006.
This creates an anomalous situation and the Committee observed that in order to provide reasonable tariff protection to this industry its raw materials ie HRC stainless steel sheets (PCT 7219.1300 and 7219.1400) and nitric acid (PCT 2808.0010) may be allowed @ zero percent rate of duty.
Tropical MPs (multi panel) air-conditioner system attracts less customs duty @ 10 percent (as against 50 percent duty on the other similar air-conditioning system) on the grounds that it has an improved thermostat which saves energy. Sabro Engineering Ltd, the local manufacturer of air-conditioners, has agitated that very low duty structure on Tropical MPs multi panel air-conditioner system ( @ 10 percent) may be brought at par (ie 50 percent) with other air-conditioning systems by levying regulatory duty @ 40 percent.
The Committee did not agree with the proposal, and recommended that the EDB may carry out study about energy efficiency of this product, whether that is merely based on improved thermostat and really saves energy up to 40 percent, and the matter will be taken up in the next budget exercise based on the report from EDB. Till that time the duty on Tropical Multi system Air-conditioners being imported by LG may continue @ 10 percent as against 50 percent on other air-conditioners.
CHANGES/CORRECTIONS IN SROS: The Anomalies Committee also recommended the following corrections in various SROs: In SRO 565(I)/2006, against Sr No 59, in column (2), the description "Stearic Acid" may be changed with the description "Stearic Acid/Distilled Fatty Acid (DFA)" because of the fact that DFA is produced in Oleo Chemical Industry as a first step followed by stearic acid;
In SRO 565(I)/2006, the words "Deep Draw" appearing against Sr. Nos. 2(4) for air conditioners, 3(5) for deep-freezer/chest cooler, 4(5) for refrigerator/visi-coolers and 5(3) for washing machines may be deleted (Correction of typographic error);
In SRO 565(I)/2006, in Sr. No 74(7), the word "water" may be deleted and for the word "Flake", the word "flaker" may be replaced (Correction of typographic error);
In SRO 565(I)/2006, PCT code "7409.1100" for copper foil and PCT code "4805.5000" for filter paper and paperboard appearing against items No 9 & 3 under Sr No 131 (transformer industry) may be replaced with PCT code "7410.1100" and "4805.4000", respectively; (PCT Code correction); and;
In SRO 565(I)/2006, the description "solvent C-9" appearing against item No 1&2, against Sr. No 36 (pigments and dyes stuff) may be replaced with the description "hydro carbon solvent" (correction for generic name). The ECC deferred consideration on modification of regulatory duty on flat rolled steel products, advising FBR to review overall steel related proposals in consultation with stakeholders, complete its technical homework and resubmit the proposal.
ECC allowed FBR to modify/revise regulatory duties on other items of input used in local industry of paper board and ceramic tiles. The ECC considered FBR summary for items included in the list of anomalies cases taken up by Tariff Anomaly Committee (TAC), besides other proposals for levy of regulatory duty and approved its proposals to modify/revise regulatory duties on items like viscosc twisted yarn, cryogenic tanks, ceramics ware, HRC stainless steel sheets and other industry specific products.
ECC also allowed FBR''s corrections in its various SROs through technical rewording/rephrasing. State Bank Governor Salim Raza also briefed the ECC on its existing monetary policies aimed to ensure positive liquidity flow in the banking system, balanced market interest rates, and improved forex reserves.