Budget woes: RCCI fears cottage industry shutdown

Plastic moulding, embroidery sectors suffer due to the increasing cost of business

RAWALPINDI: In wake of the budget for the fiscal year 2019-20 announced by the federal government last year, traders and businessmen in Rawalpindi have expressed strong resentment, terming the fiscal document a proposal to wipe out the cottage industry of the country.

This was stated by Rawalpindi Chamber of Commerce and Industry (RCCI) President Malik Shahid Saleem while addressing a post-budget seminar at the Chamber House.

He said that under the new definition for the cottage industry in the federal budget, four changes have been proposed. The first is not having an industrial gas or power connection. The second is that all cottage industries must be located in residential areas; third is that it must not employ more than 10 labourers and the fourth is that the annual turnover should not be more than Rs2 million.

The given definition, Saleem said that it will weaken the backbone of the national economy. He added that such terms are neither plausible nor workable.

Explaining himself, he said that that under the terms for domestic connections of the Water and Power Development Authority (WAPDA) and Sui Northern Gas Pipelines Limited (SNGPL) will not allow high load for a particular section of the industry such as plastic, bakery items, food, furniture  and so on which enjoy the cottage industry tag.

The RCCI president said that there are more than 15,000 cottage industries spread across the country but the new rules of the government, increased prices of utilities and imported Chinese good, it means they are facing the prospect of closing shop.

Moreover, the plastic moulding and embroidery sectors have also suffered due to the rising costs of doing business and the government’s declared shift away from plastic products – particularly shopping bags, he added.

"The two major industries are believed to be the economic barometers of any country- one is small and medium enterprises and the second is the cottage industry. The growth of these two important sectors helps a country's economy flourish," he added.

Due to the import of cheaper Chinese goods into the country and the rising utility tariffs over the past 15 months means that cottage industries are now priced out of the market.

“Over 10,000 units have already closed their operations,” the RCCI president claimed.

He added that the chamber, in its budget recommendations, had suggested that tax incentives should be given to local industry to promote imports substitution and general sales tax (GST) should be reduced to single digits to bring down the cost of doing business.

The sales tax on cottage industry like shoe manufacturing from scrap and recycle material must be abolished, he urged.

Published in The Express Tribune, June 17^th, 2019.