ECC scraps import taxes, duties on cotton

ISLAMABAD: The Economic Coordination Committee of the cabinet (ECC) on Monday scrapped taxes and duties on imports of cotton to support ailing textile industry as erratic rainfall and harsh temperature slashed crop output by near a quarter million bales this year.

ECC took the decision during a meeting under the chairmanship of Adviser to the Prime Minister on Finance Hafeez Shaikh. The committee decided to withdraw the three percent regulatory duty, two percent additional customs duty and five percent sales tax on the imported cotton from January 15, 2020.

The decision was taken in the light of the information provided to the ECC after the first cotton crop assessment committee’s meeting in October. Cotton production would be estimated at 10.2 million bales for the current fiscal year of 2019/20 as against the targeted production of 15 million bales.

It was informed that cotton import remained duty-free till 2014/15 when customs duty of 1 percent and five percent sales tax were imposed. Later, the duty was raised to five percent. In 2017, the duties were temporarily withdrawn to have been restored subsequently.

The ECC meeting was told that the bulk of the cotton would be lifted from local farmers by 1st of January 2020. It was told that withdrawal of duties on cotton imports would not adversely affect the interests of the local farmers. Ministries of commerce and national food security and research told the meeting that the cotton import would facilitate the textile sector’s exports which are showing a rising trend.

Shaikh said availability of cotton, especially long staples, would facilitate textile value chain to maintain positive growth in exports especially of value-added products.

In July-November 2019/20, exports of readymade garments, in terms of quantity, increased 35 percent, knitwear six percent and bedwear 14 percent year-on-year.

The ECC directed the ministry of national food security and research to devise a comprehensive policy in consultation with all the relevant stakeholders, which could help in improving the production of cotton locally and serve the interests of the local farmers. “The policy shall be presented within one month’s time to the ECC,” an official statement said.

ECC also allowed the import of cotton from Torkham border through land routes from Afghanistan and central Asian states similar to the last year. Fumigation arrangements were allowed to be made at the designated areas for 2019/20.

Cotton import is allowed through sea route only under rule 28 of the Plant Quarantine Rules of 1967 / Plant Quarantine Act 1976. Ministries of commerce and food security were directed to engage the importers for establishment of facilities at the Torkham border for cotton imports through the land route. “Necessary steps will be initiated in plant quarantine rules for providing facility of meeting SPS (sanitary and phytosanitary) requirements for import of cotton through land routes,” the statement said.

As Pakistan’s trade with India is currently suspended, Afghanistan and the Central Asian states are the more viable economic sources of cotton import.

ECC further allowed the consortium with Pakistan Petroleum Limited as the operator and Oil and Gas Development Company, Mari Petroleum Company and Government Holdings (Private) Limited as partners to submit the bid directly or through their subsidiaries in Abu Dhabi 2019 bidding round for one block and make initial investment through their own resources in proportion to their shares.

It was decided that any additional financial requirement would be met by the government in case the need arises. The approval for bidding was given in view of enhancing the technical skills of the consortium, which is also working in Pakistan and for bringing additional foreign exchange to the country.

The ECC further approved the technical supplementary grant of Rs6.210 billion during the current fiscal year for recurring cost of special security division north of Pakistan Army. Two other technical supplementary grants of Rs4.966 billion were also approved for internal security duty allowance to Pakistan Army and Rs500 million for the construction of community bunkers with the support from the ministry of defence.