Textile industry gets Rs29b relief in duties, taxes

This is in addition to the Rs25b gas subsidy for textile, other export-focused sectors

ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government has given another bailout package worth Rs29 billion to the textile tycoons by waiving taxes and duties on the import of cotton - a vital input in textile manufacturing.

The PTI government, like the previous Pakistan Muslim League-Nawaz administration, is offering support to the industrial barons, who have got billions of rupees worth of incentive packages. They are now receiving gas and electricity at discounted tariffs.

The government has also recently approved a Rs25-billion gas subsidy for five zero-rated export-focused industries where textile giants are the major beneficiaries.



“The government has come up with another support package for the textile manufacturers by waiving 50% of the outstanding gas infrastructure development cess (GIDC), which amounts to Rs40 billion,” an official said. The textile industry is to pay a total of Rs80 billion in GIDC arrears.

With the scrapping of taxes and duties on cotton import, the government would lose Rs14.6 billion in customs duty, Rs6.9 billion in additional customs duty and Rs7.7 billion in sales tax, the official projected.

“The major beneficiaries are Pakistani textile barons and farmers of cotton-exporting countries,” he said.

Despite getting such incentive packages, textile exports from Pakistan to the global market have not increased significantly as Bangladesh exporters are eating into the share of their Pakistani counterparts.

According to a senior government official, the textile industry consumes around 12 to 15 million bales of cotton per year and it needs to import cotton to bridge the shortfall because domestic output was far below the demand.

Pakistan is expected to produce 10.78 million bales of cotton in the ongoing financial year, a decrease of 9.7% compared to the previous year and down 24% from the initial target of 14.37 million bales.

The textile ministry says around 10.78 million bales have already reached cotton ginning factories from farms by the beginning of January 2019.

Farmers argue the pro-industry policies of successive governments have destroyed the agriculture sector of Pakistan. The PML-N government’s 2013-18 tenure also proved damaging for the agriculture sector when it posted negative growth and cotton harvest touched its lowest in recent history.

During that five-year period, the focus had mainly been on the textile tycoons while farmers were at the mercy of such businessmen.



In 2015-16, the agriculture sector recorded a negative growth of 0.19% against growth projection of 3.9%, which indicated the lack of attention paid to the farm sector.

Cotton production in Pakistan has been virtually stagnant since 1991-92, fluctuating in a range of 10 to 12 million bales annually. The harvest fell to 9.9 million bales in 2015-16 compared to average consumption of 15 million bales, turning Pakistan a net importer of cotton.

“The current PTI government also seems to be following the same line as it is doling out support packages to the industrialists whereas the farmers are at the receiving end,” the official said.

Published in The Express Tribune, February 2^nd, 2019.

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