Textile ministry opposes duty on cotton import

ECC rejects ministry’s argument, restores levies to shield interest of farmers

ISLAMABAD: The Ministry of Textile Industry has opposed the restoration of duty on cotton imports in an attempt to safeguard the interest of textile manufacturers, but the move will hurt farmers who have already been suffering for the past few years.

Many farmers have switched focus to other crops, particularly sugarcane, as incentives for cotton import have made their produce less appealing.



In the last fiscal year, the agriculture sector performed below par because of lack of interest on the part of government, which is considered pro-industry.

However, now that elections are just a year away, the PML-N government is trying to win support of the farmers and has decided to restore the import duty and general sales tax on cotton import despite fierce resistance from the textile secretary. At present, the Ministry of Textile Industry runs the Cotton Commissioner office and the Pakistan Central Cotton Committee, which could ignore the challenges faced by the farming community.

The textile ministry, which mainly looks after the interest of industrial sector, has a natural clash of interest with the agriculturists. It has forged no linkages with the agricultural community and all issues related to research on seeds and other inputs are being dealt with by the Ministry of National Food Security and Research.

In a meeting of the Economic Coordination Committee (ECC) held on May 16, the Finance Division recalled that the ECC had decided in April to constitute a committee, headed by Board of Investment Chairman Miftah Ismail, which would review the proposal of re-imposing duty and sales tax on cotton import and submit its report.

The committee would comprise commerce secretary, finance secretary, textile industry secretary and national food security and research secretary. The Finance Division said the committee held its meeting on May 5 where the textile industry secretary insisted that the incentive package given by the government had restored confidence of the textile industry.

It was reflected in the data for textile exports as well. In March 2017, textile exports grew 6.16% to $1.06 billion compared to the corresponding period of previous year.

Earlier, textile exports were unimpressive. They stood at $13 billion in financial year 2012-13, but dropped 2% and 7.4% in financial year 2014-15 and 2015-16 respectively.

Making the case for duty-free cotton import, the textile secretary pointed out that Pakistan’s cotton demand was estimated at 14 million bales whereas it produced only 10.6 million bales last season, reflecting a shortage of 3.4 million bales.

He said millers had so far imported 1.7 million bales, but still 2 million bales more were needed. Hence, an abrupt reversal of incentives would send negative signals to the market.



However, after comprehensive discussion, the committee recommended that the government may restore the duty and sales tax on cotton import instantly, but it should be applicable from August 15.

The Finance Division sought ECC’s approval for the recommendation of the committee. The ECC agreed to restore the duty and sales tax on cotton import from July 15, 2017.

Published in The Express Tribune, May 25^th, 2017.

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