In Pakistan, yarn manufacturers demand duty-free cotton import

Published: October 9, 2019
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PCGA has revised down the cotton production estimate by 32% to 10.2 million bales in the fiscal year that started on July 1, 2019. PHOTO: FILE

PCGA has revised down the cotton production estimate by 32% to 10.2 million bales in the fiscal year that started on July 1, 2019. PHOTO: FILE

KARACHI: Yarn manufacturers have demanded that the government allow duty-free import of cotton in order to overcome a significant shortfall in domestic production and achieve the overall export target through textile, which is the largest export sector in the national economy.

Speaking at a press conference on Tuesday, All Pakistan Textile Mills Association (Aptma) Chairman Dr Amanullah Kassim Machiyara said there was a need to import five million cotton bales (of 170 kg each) worth around $1.5 billion to achieve the textile export target in current fiscal year 2019-20.

Duties and taxes on cotton import comprise 11% of the import price. Taxes have made this essential import unviable for the yarn manufacturers, say industry players. Machiyara said there was no other option but to import cotton to overcome the production shortfall in the country. “Import has become a must if we are to manufacture yarn for the fabric and cloth-making sectors of textile,” he added.

“If the government withdraws duties and taxes from imports, then our textile sector may meet the export target. Otherwise, we may miss the goal by 5-10% in the current fiscal year,” he said. “The government has yet to realise that duties on imports will be a disaster for the economy.”

Textile exports accounted for 61% (or $2.30 billion) of the total export proceeds of $3.75 billion in first two months (July-August) of the current fiscal year. They had come in at 58% (or $13.32 billion) of the total export proceeds of $22.97 billion in the previous fiscal year, according to the Pakistan Bureau of Statistics.

Duties and taxes on imports include 3% customs duty, 2% anti-dumping duty, 5% sales tax and 1% income tax.

“Besides, there is 17% general sales tax (GST) on yarn, which is refundable. However, we demand that the government again declare textile as a zero-rated sector,” he said.

He pointed out that cotton production had been badly hit by untimely rains and pest attacks.  The Pakistan Cotton Ginners Association (PCGA) has revised down the cotton production estimate by 32% to 10.2 million bales (of 170 kg each) in the fiscal year that started on July 1, 2019.

Initially, the Federal Committee on Agriculture (FCA) had set the cotton production target at 15 million bales for the year. “The production target of 15 million bales has been unrealistic since day one,” Machiyara said.

The estimated one-third drop in cotton output to 10.2 million bales has sent prices soaring to over Rs9,000 per 40kg.

“The price of imported cotton is lower than Rs8,900 (including all duties and taxes) compared to the poor quality locally produced cotton,” he said. “If cotton and yarn become expensive, who would buy our textile products in export markets?”

Published in The Express Tribune, October 9th, 2019.

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