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October 13, 2019

Smuggling, high energy costs hurt ceramics, tiles industry


October 13, 2019

ISLAMABAD: Sales of local ceramics and tiles have improved after the imposition of anti-dumping duty on Chinese substitutes, but smuggling and high cost of energy and transportation are marring the fair competition and government’s revenue collection, an industry’s top official said on Saturday.

“The sector has a huge untapped potential to create jobs and contribute to GDP, tax revenues and exports, if it is given due support,” Masood Jaffery, chief executive officer of Shabbir Tiles said.

Jaffery, talking to the media, said tax rebates and incentives announced for new manufacturers in the proposed industrial zones under the China-Pakistan Economic Corridor framework would disturb the balance in the industry.

Existing manufacturers have invested significant capital mainly in machinery and development of human resource, he added.

“Over the last two years, we have invested Rs2 billion in our plants expansion and in balancing, modernization and replacement of the units,” Jaffery said.

“We want to drive the sector forward. We will launch four new products soon that would have wide acceptance and demand due to its top quality and innovation.”

In 2016, the local tiles industry had lodged a complaint to the National Tariff Commission (NTC) against under-invoicing/dumping of Chinese tiles in Pakistan. After a proper audit, the commission found numerous Chinese tiles manufacturers exporting tiles to the country at rates well below their cost. In October 2018, the NTC slapped anti-dumping duties ranging from 9.35 percent to 36.35 percent on 14 Chinese tile manufacturers.

Importers obtained a stay order against the NTC decision from Lahore High Court, but recently the stay order was vacated.

Jaffery said after the imposition of anti-dumping duty on Chinese tiles the company’s market share and profits increased compared to losses three years back.

“The major market share has been grabbed by tiles being imported or smuggled in the country from China, Iran and the UAE,” he added.

“Tiles are being smuggled from Iran. Since they are inferior in quality and cheap, if imported through proper channel the duties and sales tax on duty-paid value would make them uncompetitive and help boost local industry and earn revenue for national kitty.”|

Jaffery said transportation charges increased after the National Highways Authority imposed new restrictions on weight-carrying capacity of trucks on highways and motorways.

“One-third of our manufacturing cost is of gas, while transportation cost is also high.” Since July 2019, he said gas tariff has been increased by 31 percent, which is in addition to 30 percent increase in the last financial year, putting pressure on cost of production.

“The government recent decision of axle load restrictions in absence of a proper road infrastructure master plan and a transportation regulatory body has significantly raised costs of transportation for raw materials and finished goods.”

On a question that why are not they using railway for transportation, the company’s head said Pakistan Railways is not giving end-to-end service, “so it is not feasible for use this mode of transportation”.

Shabbir Tiles head said tiles and ceramic industry could create more jobs, mostly unskilled labor if given due importance by the government, including subsidised gas and tax cuts.

“The government’s support would also enable the sector to compete with the regional players and increase exports.”