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July 4, 2015

Aptma’s ‘voluntary closure’ option for mills mulling strike

LAHORE: The All Pakistan Textile Mills Association (Aptma) announced on Friday that its members could adopt “voluntary closure” as an alternative to a strike in protest against the continuing crisis faced by the textile industry.
According to the chairman of the association, S M Tanveer, while Aptma had tried to persuade its member not to go on a strike, textile mills unable to continue their operations were free to cease production, a press release from the organisation said.
“We do not want to confront the government,” he declared in his remarks at a meeting, “but the unfair measures it has adopted to squeeze money from the millers are deeply resented by our members.”
He once again warned that while Pakistan’s textile sector was already “on the verge of collapse,” a similar fate was going to befall the value-added sector when its stocks are exhausted and it is left starved of yarn and fabric.
The Aptma chairman also complained that by increasing tariff though new taxation, the government had evened out the benefits for power consumers of Nepra’s lowered oil prices.
The power tariff climbed to Rs14 per unit after the government increased duties on electricity by Rs4 per unit, Tanveer pointed out, and the increase translates into an additional burden of Rs200 million per day on the textile industry—or Rs72 billion every year.
Power tariffs in all regional economies are lower than 10 cents per unit, he added.
The textile industry consumes about 2000MW of electricity, most of the power consumed by textile industry units in Punjab.
Against Pakistan’s textile exports of $13 billion, said Tanveer, the textile industry will be paying an additional $1 billion on new power and energy taxes imposed in the 2015-06 budget.
“Our global buyers are shifting to cheaper suppliers from competing economies as they refuse to share the burden of the new taxes on power and energy in Pakistan,” he remarked.
Aptma’s Group leader, Gohar Ejaz, complained in his remarks that the government is suffocating the textile industry by slapping five percent sales taxes on non-registered buyers of yarn and fabrics in the new budget. This means, he added, that there are additional costs of around Rs65 billion for the exporters.
A sales tax of three percent was applied on sales to non-registered buyers, of which two percent was refunded to the exporters and only one percent was non-refundable, Ejaz said.
He accused non-registered buyers of having dodged the government for more than 25 years in documentation of their trade, lamenting the fact that they still are not prepared to come into tax net.
The Federal Board of Revenue must bring them into the tax net, rather than abdicating its duty by passing on the loss to the exporters, Ejaz demanded.
He complained that tax collectors are imposing what he called innovative taxes on an industry that is already tax- compliant.
He said Pakistani consumers should not be asked to bear the high cost of the project TAPI (Turkmenistan-Afghanistan, Pakistan-India) gas pipeline. He said cost of the project should be recovered though gas tariff from the gas that passes through this pipeline.
In any case, he added, gas pipeline projects should be undertaken only if they promise to be found feasible.
Ejaz said it is surprising that successive governments have recognised the need to provide incentives to the textile sector, but they continue increasing taxes on the sector and the incentives announced for it are never implemented.
He said the Technical Upgradation Fund announced for bringing in new textile technology through interest rebate support in 2009 was never notified. A similar initiative announced in 2014 is yet to be notified as yet, he added.
The textile crisis is reduced Pakistani exports, declining domestic markets, and capacity closures, Ejaz said.
Imports are making inroads into Pakistani textile markets because domestic manufacturing has become unviable, according to Ejaz.
As of today, he added, 30 percent of textile capacities have been reduced.
He blamed high production costs, energy shortages, backward technology, cotton shortages and marketing handicaps. He said Pakistan’s over-valued currency, high taxes on exports and the government’s failure to implement trade policies are other causes of the crisis in which the sector faces finds itself today.