Economic Coordination Committee (ECC) of the Cabinet Wedne-sday approved extension of Prime Minister's Export Package for the next three years (up to June 30, 2021). According to Commerce Secretary Younus Dagha, the components of the export package are estimated to provide competitive benefits of around Rs 65 billion annually, including Rs 41 billion in Drawback of Local Taxes and Levies (DLTL) to the export sector.
Ministry of Commerce and Textile proposed a five-year (2018-23) export package for all the 'deserving' export-oriented sectors with an estimated financial impact of around Rs 240 billion in five years.
The ECC approved the Prime Minister's package of incentives of Rs 180 billion for exporters of textile and non textile sectors on shipments made from January 16, 2017 to June 30, 2018. The package was aimed at improving export competitiveness which had been adversely affected due to high energy costs, rupee depreciation and high import tariffs on inputs. The package was improved further by the ECC on October 6, 2017 by allowing 50 per cent of the incentives to all eligible sectors and the remaining 50 per cent to those exporters who enhance their exports by at least 10 per cent in FY 2018 compared with FY 2017. Besides, in order to encourage market diversification, 2 per cent of FOB value was allowed for exporters of non-traditional markets.
Prime Minister's export package has contributed towards bringing about a turnaround in exports in FY 2018 which had been continuously declining since FY 2014. During July-April 2017-18, exports registered an increase of 14 per cent with the corresponding period of the previous year. It contributed additional $ 2.3 billion foreign exchange earnings during this period. The additional gains are estimated at around $ 2.5 billion by the end of the financial year 2017-18.
The export package is scheduled to conclude on June 30, 2018. During recent months, though exchange rate has been rationalised reducing one element of extra costs from the export sector, the other major factors viz. energy costs and high tariffs on raw materials and intermediate goods continue to affect the export competitiveness vis-à-vis regional competitors.
Commerce Division argues that in order to maintain the growth momentum, the export package needs to be continued. However, the package in its present form, with only 10.4 per cent incentive for non-textile sector which contributes 40 per cent to the national export basket, does not facilitate the efforts of diversification of exports into non-traditional sectors.
After explaining the entire current situation of exports, Ministry of Commerce and Textile proposed that to improve competitiveness and incentivise investment in exports-oriented production, the Drawback of Local Taxes and Levies (DLTL) may be extended, on the same terms and conditions, for the commercial and manufacturer exporters for five years and the zero rating of textile machinery imports and withdrawal of duty on manmade fibres, other than polyester, may be continued. Besides, in order to encourage more non-traditional sectors, electric fans, electrical appliances, electrical equipment and cables, transport equipment including more bikes, spots bags, leather products e.g. leather wallets, auto-parts, stationary, furniture, pharmaceutical products, fresh fruits & vegetables, meat and meat preparations including poultry, juices & syrups may be included in the package.
The Ministry of Commerce proposed the following options for the DLTL: (i) all the existing sectors and new non-textile sectors may be allowed DLTL at the existing rate at an estimated cost of Rs 79 billion; (ii) the existing sectors excluding raw materials (such as yarn, fabrics, tanned leather etc ) and new non-textile sectors may be allowed DLTL at the existing rate ( estimated cost Rs 64 billion); (iii) in case the fiscal space is restrictive, the existing and new non-textile sectors may be allowed at the reduced rate (estimated cost of Rs 43 billion); and (iv) the existing sectors excluding home textiles/ made- ups and raw materials (such as yarn, fabrics, tanned leather etc.) and new non-textile sectors , may be allowed DLTL at the reduced rate ( estimated cost Rs 27 billion).
An official statement issued by the Commerce Division, states that the package aims at improving the competitiveness of the textile and non-textile export sector to continue the export growth in the coming financial years.
Highlights of Rs 65 billion Exports Package:
New sectors included for duty drawback: (i) electric fans; (ii) transport equipment; (iii) auto parts and accessories; (iv) Machinery incl. Electrical Machinery; (v) furniture; (vi) Stationary; (vii) fruits (viii) vegetables; (ix) meat and meat preparations; (x) poultry and poultry preparations.
Exports to non-traditional markets will continue to receive 2 percent more yarn, grey fabric and tanned leather, being raw materials have been excluded from the eligible sectors.
The eligible sectors continued for the extended package are: (i) textile garments; (ii) processed fabric; (iii) home textiles; ( iv) gloves; (v) footballs and other sports goods; (vi) leather garments (vii) other leather goods including bags, wallets and belts (viii) footwear; (ix) surgical goods and
(x) cutlery.
Packaging material has now been allowed for Zero rating and GST refunds. Ministry of Commerce had sought tariff reduction on import of 484 export sector inputs out of which 255 recommendations have been included in the Finance Bill approved by the parliament. For the first time commercial importers will also be entitled.