ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) in its budget proposals has sought the revival of various energy and other subsidies, deferred sales tax refunds, service-based tariff, and restoration of zero-rating status for the export sector.
The draft of the budget proposals for 2023-24 was sent to the finance minister. Focusing on the dwindling exports of the country, APTMA submitted a set of 15 budgetary proposals, which it considers are imperative to put exports back on a positive trajectory.
As per the details, the proposal sought refunds of deferred sales tax, continuation of long-term financing facility, refund of detention and demurrage charges, the revival of RCET, service-based tariff for export sector, reasonable open access (wheeling) charges, and end to the disparity in prices and availability of gas between export sectors of Punjab and Sindh, as well as the restoration of the zero-rating status.
It also sought for the abolition of import duties on polyester staple fibre, refunds due under TUFF (2009-2014), and sizeable budgetary allocations for the establishment of an export facilitation desk, national compliance centre (NCC), National Cotton Advisory Service, cotton seed multiplication, as well as a supply chain and DNA testing lab.
APTMA Patron-In-Chief Dr Gohar Ejaz signed the draft. It asked the government to allocate a significant portion of the budget towards maintaining the RCET until the end of FY24. By keeping the tariff at Rs19.99/kWh for EOUs, the government can ensure continued competitiveness of the textile sector in Punjab.
The APTMA also asked the government to allocate a suitable budget to the Ministry of Energy’s Power Division for specifically address the cross-subsidy and stranded cost issues.
Highlighting the disparity in prices and availability of gas between Punjab and Sindh, APTMA said that this imbalance has reached a critical point, where Punjab-based industries, comprising more than 50 percent of the installed capacity, were unable to operate.
Industry also mentions about the increasing working capital problems and asked for restoration of zero-rating (SRO 1125) and the implementation of a 18 percent general sales tax (GST) on export-oriented sectors. These policy changes have significantly increased business costs, working capital requirements, and interest rates.
Currency depreciation and accumulation of “deferred sales tax” have exacerbated the situation, resulting in cash flow issues and capital being held by the Federal Board of Revenue (FBR).
APTMA urged to revive SRO 1125, revise the sales tax collection system, and provide immediate refunds. The textile association also requested the Ministry of Finance to allocate funds in the upcoming budget to urgently address the issue of pending and deferred refunds.
The Ministry of Finance has also been requested to allocate a budget to cover the losses incurred by exporters due to port detention and demurrage charges. Immense difficulties are being faced by the textile mills as banks are not clearing import documents, and the collector customs are refusing to waive these charges. With already high rates of raw materials, the imposition of nearly 40 percent demurrage and detention charges has rendered the industry uncompetitive.
“Importers should not be held responsible for these charges, as they are a result of a lack of dollars in the country. The total cost of demurrage and detention has already reached approximately Rs1.5 billion, and the payment in US dollars to shipping companies further depletes the limited forex reserves,” it added.
APTMA proposes that demurrage and detention charges for the stranded and delayed containers, stemming from the non-availability of forex, be refunded from the Export Development Fund (EDF).
The Ministry of Finance has also been asked to facilitate the release of funds to settle the long outstanding claims against the Technology Upgradation Fund (TUFF) for the period of 2009-2014.
APTMA also said that the recent decision by the State Bank of Pakistan (SBP) to increase the markup rate of the Export Finance Scheme (EFS) and Long-Term Financing Facility (LTFF) has severely impacted the export-oriented industries.
This move, coupled with existing challenges such as higher interest rates and increased working capital requirements, hampers exporters’ access to working capital and raises the cost of export-oriented goods. It threatens the global competitiveness and long-term productivity of the textile industry.
Industry requests for budgetary allocations to address this issue by expediting the approval of enhanced LTFF limits, reviewing and reconsidering mark-up rates, and ensuring the continuity of concessionary finance to sustain the industry’s growth.
ATPMA asked to allocate a sufficient amount for the newly established NCC to ensure its effective operations and to address the challenges related to sustainability in Pakistan’s industry. The budget should encompass key areas such as staffing and training of qualified personnel to regulate and monitor compliance bodies, development and implementation of standardised guidelines based on UN conventions on human and labour rights, environment, and good governance.
With a view to ensure the smooth functioning of the export sector in Pakistan and to address the challenges faced by the manufacturers, it is essential to allocate an adequate budget for the establishment of a dedicated facilitation desk, which will be reporting directly to the Prime Minister and his Cabinet.
This facility would serve as a one-stop solution for exporters, providing immediate assistance and resolving any minor irritants that may arise in the supply chain.