Spinners get their wish as duty removed

ISLAMABAD: The Federal Board of Revenue (FBR) has done away a controversial 15 per cent regulatory duty on the export of yarn.

The Cabinet Committee on Textiles had imposed the duty in a meeting on yarn crisis on May 13. The duty was to remain in force for two months.

However, the decision was widely criticised by exporters and spinners who said yarn prices had declined by over 10 per cent with the duty on exports. This was in sharp contrast to those who represented the value added sector who welcomed the move.

The FBR was forced to amend its earlier decision after weeks of protests and negotiations. According to the new notification, the duty has been waived for 32,000 tons of regular yarn upon letters of credit issued by officials of the Ministry for Textile until July 26.

The duty has also been waived for every 2,000 tons per month of high quality value added yarn from Teera, which is sold at $3.50 per kilogram.

The notification also stated that yarn manufactured from cotton before May 12 and imported under the Duty and Tax Remission for Export (DTRE) or any other scheme is also not liable to pay the regulatory duty unless the quantity of yarn being exported is more than the amount of cotton that was imported.

The amended notification is a sign of the government flexibility. As spinners and value added textile manufacturers dwelled, both had attempted to convince the government to accept their points of view. The value added sector had welcomed the decision to impose the duty while the spinners opposed it, saying a free market mechanism should be followed.

Spinners said value added textile mills want to buy yarn at 85 cents instead of 100 cents because of which they mislead the government about yarn exports. Yarn manufacturers had claimed that the duty was causing a loss of $200 million per month.

Published in the Express Tribune, June 8^th, 2010.