ISLAMABAD: A high-level delegation from the All Pakistan Textile Mills Association (APTMA) on Tuesday held a meeting with Minister of State for Finance Ali Pervaiz Malik and discussed issues being faced by the textile industry.
The delegation comprising Chairman Kamran Arshad, Chairman North Asad Shafi, Chairman South Naveed Ahmed, Former Chairman Asif Inam, former chairman Aamir Fayyaz and former chairman Syed Ali Ahsan expressed their gratitude to Prime Minister Mian Muhammad Shehbaz Sharif, Finance Minister Muhammad Aurangzeb, and their team for steering the country through challenging economic times.
During the meeting, the APTMA leadership voiced their concerns about ongoing challenges faced by the textile sector which have led to a substantial underperformance in exports, currently, lagging by $9 billion compared to the sector’s potential.
APTMA chief underscores need for reducing electricity tariffs, restoring RCET
The delegation appreciated the government’s efforts to reduce the cross subsidy in industrial power tariffs.
However, they stressed that there is still a long way to go in making grid prices financially viable and regionally competitive as they currently around 15 cents/kWh, despite the substantial reduction in the cross subsidy, compared to 6-9 cents/kWh in regional economies such as India, Bangladesh, and Vietnam.
According to APTMA, the government’s commitment to the IMF to cease gas supply to captive power plants (CPPs) by December 31, 2024, is another critical issue that was highlighted.
The delegation emphasised industries currently reliant on gas-fired captive power are unlikely to shift to the national grid given its financial unviability. If gas supply to CPPs is shut off, they will either seek alternative energy sources or shut down operations. The APTMA strongly urged the government to revisit this policy.
Another major issue highlighted was the withdrawal of zero rating/sales tax exemption on local supplies for export manufacturing under the Export Facilitation Scheme by the Finance Act 2024. This has caused exporters to shift from domestically-produced inputs to imported ones, as the 18 per cent sales tax on local inputs, while refundable, takes months to process, straining liquidity and increasing costs.
The withdrawal of tax exemptions has particularly impacted the spinning sector, which was already struggling with high energy costs and unfavourable business conditions.
By June 2024, domestic yarn production had plummeted 41 per cent compared to July 2023, while cotton yarn imports surged by 435 per cent year-on-year in August 2024.
Over 40 per cent of spinning units have shut down, leading to widespread unemployment and the loss of millions of livelihoods.
The APTMA also highlighted the growing misuse of EFS, where yarn imported under the scheme for export manufacturing is being illegally sold in the domestic market to the further detriment of the domestic industry.
The APTMA also highlighted distortions in the tax regime introduced in the FY25 budget, where exporters were moved from a one per cent fixed tax on export proceeds to the normal tax regime but are still subject to the 1.25 per cent advance tax on export proceeds (including the export development surcharge), which is severely disadvantaging export-oriented firms.
The meetings were highly productive, with both the Minister of State for Finance and Revenue, Ali Pervaiz Malik, and senior officials from the Federal Board of Revenue (FBR) demonstrating a positive and responsive attitude toward the concerns raised by APTMA.
The delegation was encouraged by the open dialogue and the proactive approach taken by the government officials in addressing the challenges faced by the textile industry.
Their commitment to finding workable solutions to the energy, taxation, and export facilitation issues was evident, and APTMA is optimistic about the steps that will be taken moving forward.
Copyright Business Recorder, 2024