KARACHI/LAHORE: Businessmen on Tuesday termed cuts in regulatory duties on raw materials as a much-needed catalyst to boost industrial production, but feared that a hike in gas tariff might weaken their competitiveness in the international market.
Federal Finance Minister Asad Umar on Tuesday proposed the removal of regulatory duty on raw materials, along with allowing non-filers to purchase vehicles and properties, while higher tax rates for higher earning class were also suggested.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) appreciated the mini-budget, terming it moderate; however, some businessmen called it a “typical approach accompanied with a typical speech to tax the already taxed”.
Mufassar Malik, president Karachi Chamber of Commerce and Industry (KCCI), said there was “no change in the approach and vision of the current government”, as they too had opted for revenue managing measures in vogue for decades.
“Finance minister has announced removal of regulatory duty on around 1,800 items, but that comes with massive hike in gas prices and upcoming increase in electricity prices. Business community is not impressed so far,” Malik remarked, while criticising the proposed relief to be given to the non-filers, in case the bill was approved.
Zubair Motiwala welcomed the proposal to remove regulatory duty on the import of raw materials for the export-oriented industry, and extended support for narrowing down the trade deficit.
“However, we are still not aware of the items on which the regulatory duty has been removed. After reviewing this list, we will be in a better position to suggest the impact of this development,” the businessman added.
Motiwala, however, criticised the 30 percent gas price increased for the industrial sector and recommended elimination of gas infrastructure development surcharge.
“The 30 percent increase in gas prices for industrial sector is too high, which would increase the cost of doing business. Industry needs level playing field against the regional competitors and such increase in utility prices would not help,” he said.
Javed Bilwani, chief coordinator Pakistan Hosiery Manufacturers and Exporters Association (PHMEA), also welcomed the removal of regulatory duty, but criticised increasing withholding tax on banking transactions to 0.6 percent from 0.3 percent.
“The exporters do not get adjustments against this withholding of tax, we get refunds, but it is a very lengthy and tiresome process. Higher tax deductions will lead to higher stuck up refund claims,” he lamented.
Bilwani recommended that raw material, which was not produced in Pakistan, should be exempted from the import duty to support the export-oriented industry.
The FPCCI termed the amended finance bill for fiscal year 2018/19 moderate, and said it would generate additional revenue for the cash starved country.
Waheed Ahmad, acting president FPCCI, lamented the increase in customs duty on more than 5,000 items, and regulatory duty on more than 900 items. He said the government should have levied luxury items instead of imported raw materials and capital goods that were not produced locally.
He said the government needs to take corrective measures against smuggling to safeguard the local industry. He also argued against the proposal to slash the public sector development programme (PSDP).
“The reduction in PSDP from Rs725 billion to Rs475 billion would hurt the development of infrastructure projects, a prerequisite of industrialisation,” he added.
He, however, appreciated the move to ensure uninterrupted supply of fertiliser to the farmers at an affordable rate for which a subsidy of Rs6 billion to Rs7 billion has also been approved.
The FPCCI’s acting president hailed the government’s decision to absorb the impact of an increase in petroleum levy from Rs185 billion to Rs300 billion, and not passing the same to the masses.
Industrialists are divided on proposed uniformity in gas prices.
The officials of the Lahore and Karachi chambers opposed the tariff hike, as well as the “incentives given to the non-filers”.
The Lahore Chamber of Commerce and Industry (LCCI) said the timeline for increase in gas tariff was not right.
Malik Tahir Javaid, president LCCI, Khawaja Khawar Rasheed, senior vice president, and Zeshan Khalil, vice president, said massive increase in gas tariff would hurt exports as it would jack up the cost of doing business, and expel Pakistani products from the international export market.
They termed the proposals as “anti-business measures”, which would hamper the growth of the manufacturing sector.
“The increase in gas tariff would create multiple problems for the industrialists, as they have to bear heavy loss while fulfilling their export commitments,” an LCCI statement said.
The government always vows to take the private sector on board, but departments like Oil and Gas Regulatory Authority do the opposite by not consulting the LCCI or any other sector-specific association, the officials lamented.
The LCCI office-bearers urged the government to withdraw hike in gas tariff immediately in the larger interest of the economy.
Gohar Ejaz, patron-in-chief All Pakistan Textile Mills Association (APTMA), welcomed the government’s announcement to provide uniform regionally competitive energy rates across the country to the textile industry.
Ejaz said textile millers had heaved a sigh of relief after a long period of non-viability, and were expecting a revival of the industry in the days ahead.
He said the textile industry was burdened with Rs100 billion/annum in energy costs during the last five years.
“Resultantly, 30 percent production capacity was closed down, export-potential worth $4 billion became redundant, and thousands of workers were laid off by the industry,” the Aptma chief said.
The textile industry envisages undertaking BMR and greenfield investment initiatives to create exportable surplus, sustainable jobs and economic growth, he said.
Ejaz also extended an assurance on behalf the textile industry of supporting the government in achieving its target of economic growth and overcoming the unprecedented trade deficit.
The All Pakistan CNG Association (APCNGA) said the hike in the price of natural gas would leave the troubled CNG sector unviable.
The association in a statement said the CNG sector, which was facing multiple problems would become unfeasible after the gas price hike, which would waste Rs450 billion, and leave thousands unemployed “therefore it should be insulated”.
The APCNGA Central Chairman Ashar Haleem said the non-viability of the limping CNG sector would add to the oil import bill, the budgetary deficit, and environmental pollution.
The CNG sector was already paying more than any other sector for natural gas, while an additional burden of 40 percent on this sector would be unbearable as it would increase the price of fuel by Rs18-Rs20, Haleem said.
“Increased price of the fuel will result in little difference between the price of gas and petrol, while masses will be deprived of an economical fuel, resulting in many problems including the high cost of transportation,” he added.
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