Govt refuses to allow raw material import from India

Published: February 21, 2020
PHOTO: Reuters

PHOTO: Reuters

ISLAMABAD: Amid a trade standoff with the neighbouring country, the government has refused to allow South Korean firm Lotte Chemical Pakistan import of raw material from India.

According to officials of the Commerce Division, Lotte Chemical Pakistan Limited – a major South Korean investment in Pakistan – had approached the Ministry of Commerce, seeking permission to import 40,000 tons of paraxylene from India, which is a raw material for manufacturing pure terephthalic acid (PTA). This raw material is not produced locally and it needs to be imported.

Lotte Chemical is the only manufacturer and supplier of PTA in Pakistan. The company’s annual production capacity is 506,000 tons. Major shareholding in the company is held by Lotte Chemical Corp (75%), followed by individuals and others (15%), local mutual funds/companies (6%) and foreign mutual funds/companies (4%).

The company’s major PTA consumers include ICI, Gatron Industries, Ibrahim Fibres, Rupali Polyester, etc.

Pakistan shifts away from Indian goods import

PTA is used by textile as well as packaging and bottling industries. In the textile industry, PTA is consumed for the manufacturing of polyester staple fibre and polyester filament yarn. In the bottling industry, PTA is used in the manufacturing of polyethene terephthalate (PET).

Owing to the suspension of trade with India, a summary was sent to the prime minister, seeking his approval to allow Lotte Chemical import of paraxylene from India as the Import Policy Order 2016 empowered him to permit imports by easing any restriction.

Subsequently, the Prime Minister’s Office said the prime minister desired that the matter should be placed before the federal cabinet for decision.

Prior to the submission of the summary, the federal cabinet had not approved a summary submitted by the Ministry of Commerce for pesticides import from India by the governments of Khyber-Pakhtunkhwa (K-P) and Punjab and also turned down the proposal of the Ministry of National Health Services, Regulation and Coordination for the import of polio finger markers.

However, the summary on polio finger markers was subsequently approved by the cabinet on December 24, 2019 as goods had already arrived in Islamabad. Therefore, the summary for import of 40,000 tons of paraxylene from India was not submitted to the cabinet. On a fresh request of Lotte Chemical, Adviser to Prime Minister on Commerce, Industries, Production and Investment Abdul Razak Dawood gave directives for preparing a summary for the import of 40,000 tons of paraxylene from India.

In his opinion, the import of competitively priced raw material – PTA, which was an intermediate product for the textile sector, was critical for Pakistan’s export competitiveness.

The adviser felt that Lotte was a large Korean investment and its big plant was suffering so the company might be helped and allowed import of 40,000 tons of paraxylene in a one-off relaxation. He was of the view that it would give the company time to find other sources.

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During the discussion in a cabinet meeting, it was pointed out that sudden imposition of restrictions on trade would discourage potential international investors. Counter-opinion was also expressed that said the companies sourcing goods from India must have factored in the inherent risk involved.

The cabinet noted that the commerce adviser was out of the country and his input on the issue was also important.

The cabinet, chaired by Prime Minister Imran Khan, in its meeting held last month differed on the proposal and directed the Commerce Division to resubmit the proposal after exploring all options and alternatives. 

Published in The Express Tribune, February 21st, 2020.

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