Mills to close if subsidies not restored: APTMA

ISLAMABAD: Textile sector giants on Wednesday warned of handing over keys of their units to the Ministry of Finance if the government did not restore electricity and gas subsidies from July 1, 2023. Under the IMF programme, the government has scrapped the subsidy of electricity and gas for the textile sector from the next financial year.

“The prices of electricity for the textile sector stand at 8 cents for electricity and 6.5 cents for gas in India, 10 cents for electricity and 7.5 cents for gas in Bangladesh while the tariff of electricity and gas is much higher in Pakistan. It will be catastrophic for the textile sector to operate after abolishing subsidized rates. We demand regional competitive prices to boost dwindling exports. We will come with keys of factories to hand over to the Ministry of Finance,” the representatives of All Pakistan Textile Mills Association (APTMA), including Shahid Sattar and others, told the Senate Standing Committee on Finance and Revenues here at the Parliament House on Wednesday.

The APTMA representatives said the electricity tariff for the industrial sector has gone up from Rs20 to Rs40 per unit and recently the Ministry of Power informed the prime minister that the power tariff could go up to Rs49.5 per unit in the next financial year. The de-industrialization, they argued, was underway in the country, especially in Punjab, pulling down the exports from $31.5 billion to $26-$27 billion. If the trend continues, the textile exports might drop from $19 billion to $16 billion in the current fiscal.

The APTMA representatives said the government must amend the budgetary proposals and provide much-needed relief to the textile industry as 20 million human resources are attached to that industry.

They said that already 50 percent of textile units in Punjab have shut down due to an increase in the cost of production. If the subsidy is not provided, 25 percent more units will shut down. They suggested restoring the previous year’s budget subsidies on electricity and gas to ensure the survival of the industry. The representatives of packaged juices industry requested the committee to abolish the 10 percent excise duty. The government increased the excise duty last year which has not resulted in any revenue gain for the government. It has also caused a substantial decrease in sales, they said. Similarly, the representatives of Pakistan Association of Large Steel Producers demanded that the supply of local steel scrap should be exempted from sales tax under Section 13 of the Sales Tax Act 1990. They also suggested that the income tax withholding rate on scrap supplies be reduced to 0.25 percent under Section 153 of the Income Tax Ordinance.

Meanwhile, Member Custom Suraiya Ahmed Butt told the Senate Standing Committee that there would be a loss of Rs4.5 billion on account of one tariff line reduction/removal with regard to used clothes. She added that FBR would suffer a loss of Rs4.5 billion and a reduction of 152 RD lines would cost the revenue Rs5.5 billion. Upon this, the senior official of the Commerce Division said that in the last policy board meeting, the FBR was recommended to reduce the RD of 596 lines on compliance with international commitments. The Commerce Division official said that in 2019, the tariff rationalization was assigned to the Tariff Commission Board, which was not consulted by the FBR with regard to AIDP tariff proposals. The meeting reviewed the proposed changes in the first schedule to the Customs Act, of 1969 (Pakistan Customs Tariff). Senior officials from the National Tariff Commission (NTC), Federal Board of Revenue (FBR) and Ministry of Commerce presented their insights into the rationale behind the proposed amendments.