Poly Vinyl Chloride Resin is a chemical used in production of a dozen plastic, leather and cable goods. PHOTO: AFP
Lobbies that matter in the power corridor have now been pushing for a case to lower protection available to the manufacturers of Poly Vinyl Chloride (PVC) Resin, a chemical used in the production of a dozen plastic, leather and cable goods, said sources in Federal Board of Revenue.
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This is being done to promote trading by importing this chemical at the expense of the manufacturer.
This is not an isolated case, as the same well-connected politicians had managed to affect the business of Nimir Chemicals Pakistan Limited in the last budget when they used their influence on the FBR to lower its protection level.
Nimir Chemicals, which is the sole manufacturer of phthalic anhydride petrochemical, is a direct competitor of Sheikh’s Qaiser LG Petrochemicals, which uses imported phthalic anhydride for the production of di-octyl phthalate in the country.
Sheikh Qaiser is an elected Member National Assembly on the PML-N ticket and is now chairman of an influential National Assembly Standing Committee on Finance and Revenue. The committee is responsible to have parliamentary oversight on the business of Ministry of Finance, Revenue, Statistics, Privatisation and Economic Affairs.
Where the story begins…
In the last budget, the FBR had reduced custom duties from 16% to 11% on import of the PA chemical, allegedly at the behest of Sheikh. However, Sheikh denies these allegations. Nimir Chemicals Pakistan Limited claims that it has sustained Rs178 million in losses from July to December 2016 due to drop in sales of phthalic anhydride chemicals after the government lowered duties.
The NA standing committee would today (Wednesday) take the business that directly relates to Qaiser Sheikh. There will be discussion on budget proposals regarding Phthalic Anhydride (PA), Di-Octyle Phthalate and Alkyd Resin chemicals, according to the committee agenda.
Qaiser Sheikh’s factory produces Di-Octyle Phthalate chemical while he imports PA and PVC Resin chemicals.
In the second last meeting, Qaiser Ahmad Sheikh denied representatives from Nimir Chemicals Pakistan Limited the right to speak, exhibiting an obvious case of a conflict of interest between both parties. Again, in the last meeting, the issue of conflict of interest rose and Sheikh had announced that the matter would be discussed in the next meeting, which he will not chair due to clear conflict of interest.
The chairman of the committee has now taken a reasonable position by declaring that he would not chair the committee meeting, said Asad Umer of the Member of the Standing Committee. Umer, who has been elected on the PTI ticket, said the committee would decide the issue on merit without looking into individual cases.
Engro Polymer’s case
Engro Polymer, a listed company on the Pakistan Stock Exchange, is the sole producer of PVC Resin. Engro Corporation has a 56% stake in Engro Polymer, followed by International Finance Corporation (15%), Mitsubishi Corporation (10%), while 19% shares are in the hands of the general public.
In 2016, the company earned Rs655 million as profit after it had booked a loss of Rs649 million in the previous year. The company has Rs24.5 billion in assets and its equity stood at Rs6.1 billion in 2016.
There is 12% custom duty on import of PVC Resin, which sources said that trading lobby wanted to be lowered. This would have a direct bearing the a company, said the sources.
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Engro Polymer is facing another challenge of competing with imports from China. The road-connectivity between China and Pakistan under China-Pakistan Economic Corridor would reduce the cost of transportation by $80 dollar per metric tons on imports, said the sources. The transportation time will also reduce from about four weeks to hardly a week.
This poses a challenge to the plastic product manufacturing industry like PVC pipes, floorings, rigid sheet, hosepipe, artificial leather, flexible sheet, transparent films and cables.
The industry’s assessment is that it needs more protection to avoid influx of imported Chinese chemicals and has requested the FBR to increase custom duties from 12% to 20%.
Published in The Express Tribune, April 26th, 2017.
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