The government is considering withdrawing the condition of a 10 percent increase in exports for availing incentives announced in the Rs 180 billion PM Package for Exporters, as it admitted the package has failed to boost exports. As per the notification, duty drawback of taxes under the Prime Minister Package for exporters will be allowed for export GSs filed on or after July 01, 2017 to June 30, 2018, if the exporter would achieve an increase of 10 percent or more in exports over 2016-17 exports.
The committee met with Mohsin Aziz in the chair here on Tuesday. Federal Minister for Commerce Khurram Dastagir Khan advocated the withdrawal of condition of 10 percent, which was backed by the Ministry of Textile Industry and Senate Standing Committee on Textile Industry. Secretary Textile Industry, Hassan Iqbal said the proposal is under consideration as the target of 10 percent could not be achieved.
Out of the Rs 180 billion package, the commerce minister said Rs 140 billion would be given to exporters in cash while Rs 40 billion would be given in the shape of tax exemptions. He said the finance minister has given the commitment in the cabinet meeting that releases of amounts against exporters' claims would be ensured. He further said that the government needs to give confidence to exporters. He further claimed that national exports increased by 16 percent in June 2017 on year-on-year basis.
The secretary textile said that Rs 40 billion would be disbursed among exporters in the current fiscal year under the package. The Finance Ministry representative revealed that Rs 15.5 billion, and not Rs 4 billion, has been earmarked for the implementation of the Prime Minister's package in the budget 2017-18; however, the government would release more money if exporters' claims exceed.
The Textile Ministry further said that Rs 3 billion has so far been paid under duty drawbacks of taxes under the PM package against the claims of Rs 9 billion as of June 30, 2017. Substantial claims will be received in coming months and around Rs 40 billion will be disbursed against claims of January 16, 2017 to June 30, 2017. Exporters raised serious concerns in the meeting over a meagre allocation for the PM package, non-payment of refund claims, high cost of doing business including energy prices as well as an overvalued rupee, saying such factors have rendered them uncompetitive. They further said that 30 to 40 percent factories have been shut down, while others are on the verge of collapse due to high input cost.
Chairman of All Pakistan Textile Mills Association (APTMA) Amir Fayaz, senior leader of APTMA Gohar Ijaz and others said the government earmarked Rs 4 billion only against the Rs 180 billion Prime Minister's package, besides holding drawbacks, sales tax and customs duties refund claims of over Rs 200 billion, creating a serious liquidity crunch for the textile industry, negatively affecting production capacity. These factors lead to an ultimate decline in country's exports, they added. Ijaz said the Prime Minister was informed that exports cannot be increased in the prevailing situation.
The textile industry demanded immediate payment of all refunds for which RPOs have been issued and unprocessed refund claims be processed and paid by August 14, 2017 to improve liquidity position of the textile industry. Electricity is available at Rs 10.5/kwh for the industry in Pakistan as compared to Rs 7/kwh in other regional countries including Bangladesh. Furthermore, gas is available at Rs 1,000 /MMBTU in Pakistan against Rs 400 in Bangladesh. In such circumstances the industry cannot compete in international market, the APTMA representative added.
Industry is burdened with Rs 3.63/kwh surcharges on electricity and GIDC on gas which cannot be passed on to international buyers. The textile industry demanded an immediate reduction in electricity tariff to Rs 7/kwh without levy of surcharges. The committee members termed the Prime Minister's package a 'political statement' and recommended immediate measures to take the textile industry out of the woods. An official of Federal Board of Revenue (FBR) informed the committee that around Rs 45 billion, including Rs 12.912 billion deferred sales tax, Rs 13.76 billion fresh and Rs 17.92 billion RPOs of textile sector, are pending. He further said that refunds of Rs 15.2 billion sales tax are expected to be paid by August 14, 2017.