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August 24, 2019

Government levies 3pc regulatory duty on cotton import


August 24, 2019

KARACHI: The government on Friday levied 3 percent regulatory duty on the import of cotton to facilitate the growers blighted by high production cost and low market prices.

The Federal Board of Revenue (FBR) issued SRO 949(I)/2019 in compliance to the decision taken by the Economic Coordination Committee (ECC) of the Cabinet in its meeting held on July 31, 2019.

Initially, the authorities were unanimous on imposing 10 percent regulatory duty in a bid to provide farmers with a cover as the ECC was informed that urea under cultivation as well as cotton production was continuously shrinking.

Unfavorable weather conditions, particularly prolonged hot and dry weather conditions, coupled with massive attacks of whitefly, pink bollworm, and other pests/insects gave cotton crop heavy battering. Moreover, growers are increasingly losing interest in planting cotton because they are not getting any returns or profits as the production cost is rising and the market prices are falling.

Interestingly, the government imposed only 3 percent regulatory duty on cotton import instead of 10 percent. According to the Economic Survey of Pakistan for fiscal year 2018/2019, cotton production was recorded at 9.861 million bales during 2018-2019, showing a decrease of 17.5 percent over the last year’s production of 11.946 million bales, and 31.5 percent against the target of 14.4 million bales.

Cotton crop has a share of 0.8 percent in the GDP and contributes 4.5 percent in agriculture value addition. This rather poor performance was a direct upshot of a serious contraction in the cultivated area, largely owing to fewer economic incentives to the farmers. The cropped land reduced by 12.1 percent to 2,373 thousand hectares compared to last year’s 2,700 thousand hectares.

Sources in FBR said certain quarters were not happy with the levy of regulatory duty on import of cotton; therefore, a strong lobby of importers influenced the government to restrict the rate to 3 percent.

The sources said another reason behind keeping the rate lower is the import of cotton fell sharply during the last fiscal year. The country imported raw cotton worth $767 million during fiscal year 2018/2019 as compared to $1.07 billion in the preceding fiscal year, posting 29 percent decline. Cotton ginning declined by 12.74 percent due to decrease in production.

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