Pakistan Textile Exporters Association (PTEA) has sought help from Prime Minister's Advisor on Commerce, Textile, Industries and Production and Investment, Abdul Razak in resolution of their outstanding issues.
The Association has met the decision makers on a number of occasions but their issues remained unresolved due to financial constraints and legal hurdles. According to Secretary General PETA Azizullah Gohar, the following issues of industry have been brought to the notice of Prime Minister's Advisor.
One of the key issues is undue delay in payment of duty drawback of tax claims. The Association argues that a huge amount of claims of Duty Drawback of Taxes (DDT) of textile exporters is lying pending for payment creating severe financial stress, saying that if the outstanding amounts are released exporters can deploy the capital towards expanding their businesses, which in turn will help Pakistan's export earnings grow.
Gohar further stated that Income Tax credits are allowed to the industrial concerns including exporters under section 65B, 65C, and 65D of the Income Tax Ordinance, 2001 to encourage new equity /investment in country. However, in case of exporters, effect of these credits is not being properly passed to the exporters as a huge amount of tax credit claims are lying unprocessed.
Raising another issue, he stated that SME manufactures are unable to take advantage of DTRE/ manufacturing bond facility. SME manufacturers only add value to make finished product. Under SRO 648 (1) 2008, "A manufacturer can only outsource one process outside on raw materials imported under DTRE scheme". DTRE bond facility for SME manufacturers under SRO 450, 237 and 648 must be further simplified to encourage SME sector's export growth.
He further stated that the representatives of textile industry briefed the Advisor that textile exporters have been availing the facility of currency hedging for new investments and setting up new projects. Under the existing policy, State Bank of Pakistan has fixed a limit of $ 1 million for currency hedging which is quite insufficient, especially in case of setting up of new projects as it involves heavy investment in respect of machinery import etc. Furthermore, commercial banks are reluctant to entertain the exporters in granting currency hedging facility. In order to fulfill Government's vision of economic growth through industrialization, there is dire need to enhance the currency hedging limit.
The Advisor assured the delegation that he would consult the State Bank of Pakistan for increase in currency hedging limit and to ensure the availability of currency hedging facility to textile exporters by commercial banks.
PETA noted in its letter that the State Bank of Pakistan has fixed a limit of Rs.1.5 billion per party in Long Term Finance whereas the total banking limit allowed to commercial banks is fixed at Rs. 90 billion. These limits allowed for Long Term Finance has been utilized due to which exporters' demand for LTFF are being refused. This implies that they are unable to take advantage of cheaper SBP refinancing despite being fully entitled. In order to boost exports and industrialization, per party ceiling of LTFF should be increased from Rs. 1.5 billion to Rs. 3 billion; whereas total banking limit should also be increased from Rs. 90 billion to Rs. 150 billion. It was agreed to increase per party ceiling of LTFF from Rs. 1.5 billion to Rs. 3 billion and also the total banking limit from Rs. 90 billion to Rs. 150 billion.
Talking about custom duty on raw cotton, Gohar stated that raw cotton production in the country is on the decline and exporters need to import the commodity. It was agreed to bring down the duty on cotton import. The imposition of duty on cotton was discussed and it was agreed that duty etc. would be removed on January 1, 2019. Secretary Textile was also requested to coordinate with Ministry of Food Security and move the summary for the Cabinet in early December 2018.
PETA argued that the raw cotton yield in Pakistan has suffered because of unavailability of hybrid cotton seed. The global organizations need to conduct two year research on our hybrid seed which can be rolled out in third year. The required change in the legal framework took more than 12 years and we had let down "Monsanto" four times. Now the Act has been passed through the parliament. However, service rules are still pending. The cotton commodity was taken from Textile Division to Ministry of Food Security and Research by the previous government and new mechanism being sought where as we can park the registration of I.P rights in the current available framework i.e. IPO (Import Policy order). The Association has recommended that Pakistan Central Cotton Committee (PCCC) should be given back to Textile Division as that is it's logical placement.