Crises forcing tile makers to shut businesses

KARACHI: Multiple crises, including smuggling and under-invoicing being faced by the tile manufacturers has forced several tile makers to shut down their businesses, an official said on Saturday.
On an average, around 15 million metres of tiles are being imported from China and the annual loss to the national exchequer is around 20 percent to 25 percent due to under-invoicing and misdeclaration, said an official of Pakistan Ceramic Tiles Manufacturers Association (PCTMA).
The local manufacturers said not only under-invoicing and misdeclaration of imported tiles is creating problems for the industry, but low Import Trade Price (ITPs) is further pushing the local industries towards closure.
The tiles are being imported at low rates, while the ITPs have been decreased instead of increasing from 2010 to 2015, he said.
“It has never been heard in Pakistan where import price for duty evaluation was lowered on items that were already being manufactured in the country from the local raw material,” the official said.
He said all the cost indicators such as wages, transportation and energy costs are increasing in China and other countries, but surprisingly the ITPs have been decreased.
“Under this scenario, it seems illogical the price of tiles could go down in China, whereas the ITPs of Chinese tiles have reduced from $4.57 per square meter in 2011 to $2.51 in 2013. ITP for Iran was fixed in March 2014, while further 20 percent discount on ITP was given on Iranian and Middle Eastern tiles in December 2014.
The official said there is a large gap between the original price and ITPs of various sizes of ceramic and porcelain tiles is inflicting huge revenue losses not only on the local industry, but the government, as well.
Last year, 15 million tiles were imported from China. The government; therefore, should exclude the tiles from the Free Trade Agreement (FTA) with China.
The official said there is a huge potential in the sector and the annual growth rate is eight to 10 percent. There are total six manufacturers, two in Sindh; two in KP; two in Punjab, while last year one manufacturer has to shut down its plant due to heavy losses.
If the government removes anomalies in Import Trade Price (ITP) for imported tiles and review its FTA with China it can help save the local industry.
The Chinese tiles issue was already hampering the industry with the concessions and decrease in ITPs from Iran / the Middle East has further dent the local industry, the official said.
The official import from Iran is 0.3 million per month, while the smuggled tiles, which are coming from Iran through land route are much higher and mis-declared as tar-coal and Rs12,500 is being paid per container.
Iran is the fifth largest producer of ceramic tiles in the world and due to sanctions it is selling its production at cheaper rates.
The officials said that tiles are also being imported under ATT, but unfortunately the product never reaches Afghanistan and end-up in Pakistani market.
Making ceramic and porcelain tiles part of the FTA with China shows the ignorance of the policymakers about the potential of the local industry that has invested Rs40 billion so far.
The tiles production capacity in Pakistan is over 60 to 65 million square metres, while the capacity utilisation is far below due to the influx of smuggled tiles and abnormally low ITPs.
A study conducted by the National Tariff Commission (NTC) has also indicated misappropriation and had suggested imposition of 40 percent anti-dumping duty on Chinese tiles.
European countries have imposed anti-dumpy duty on Chinese tiles. China is the largest producer and produces 5.2 billion tiles and exports 600 million annually, the official said.
Last year, a major local manufacturer from Lahore had to shut down its plant due to losses. It is high time strict measures should be taken to address these issues, which are playing havoc with the industry, said the official of PCTMA.
On a question about the gas shortage, they said the local industry was already seeking alternate energy resources such as coal and some plants had already setup coal-fired power plants.
On the quality of the local product, a leading local manufacturer said: “We are exporting our product to Spain.”
He appreciated the Ministry of Commerce for taking input of the industry, while negotiating the second phase of the FTA with China and expressed the hope it would take appropriate action to protect the local tile producers.