PCDMA chief warns of EFS misuse, urges swift government action

KARACHI: Chairman of the Pakistan Chemicals and Dyes Merchants Association (PCDMA) Salim Valimuhammad has raised serious concerns over the widespread misuse of the Export Facilitation Scheme (EFS), warning that existing loopholes could lead to the collapse of small and medium enterprises (SMEs) and result in significant revenue losses for the national exchequer.

In a statement issued on Friday, the PCDMA chairman called on Prime Minister Shehbaz Sharif and the chairperson of the Federal Board of Revenue (FBR) to take immediate corrective measures.

He emphasised that raw materials imported duty-free under the scheme were being illegally diverted to the domestic market instead of being utilised for their intended export-oriented industrial purposes.

Valimuhammad explained that the EFS was designed to allow export-oriented industries to import raw materials without sales tax, enabling the production of value-added goods for export. However, he noted that the scheme is being systematically abused. “The current auditing process is inadequate. Why can’t we verify these transactions in real time?” he questioned.

He proposed a series of measures to curb misuse of the scheme, including linking raw material imports to verified export letters of credit (LCs) and establishing fixed percentage limits for duty-free imports. He warned that goods with high tariff and tax escalation rates are particularly vulnerable to exploitation under the EFS. To prevent further revenue leakage, he recommended a downward revision of the duty structure, cautioning that inaction would only exacerbate illicit trade.

“The ongoing abuse of the EFS is creating a dual crisis -- it is not only draining government revenues but also distorting the industrial ecosystem,” Valimuhammad said. “If immediate corrective actions are not taken, the scheme should be abolished altogether, as it is threatening legitimate businesses while failing to fulfil its intended objectives.”

“With proper regulation, the EFS could serve as an excellent tool for boosting exports. However, in its current flawed form, it is doing more harm than good to the national economy,” he added.