Pakistani exporters seek extension in concessions

Cite increased competition in world market while export sectors struggle

Usman Hanif July 08, 2020
A Reuters file image


Exporters have demanded that the government extend the concessionary rates for utilities for the next three years, citing that competition in the international market has grown manifold while Pakistan’s export-oriented sectors are struggling in the wake of Covid-19.

They recalled that on the recommendation of the Ministry of Textile, the Federal Board of Revenue (FBR) had offered concessionary rates of 7.5 cents per kilowatt-hour (kWh) for electricity and $6.5 per million British thermal units (mmbtu) for re-gasified liquefied natural gas (RLNG).

Moreover, Rs786 per mmbtu was charged for gas from registered manufacturers and exporters of five export-oriented sectors, and the facility expired on June 30, 2020, they expressed concern.

“If the subsidy is not renewed, it will have a disastrous impact on the exporters,” said Towel Manufacturers Association of Pakistan (TMA) Secretary General Muzammil Hussain while talking to The Express Tribune.

“Since the cost of fuel and power has fallen worldwide, it is crucial for us to offer competitive rates to foreign buyers,” said TMA Chairman Tahir Jahangir in a letter sent to Adviser to Prime Minister on Commerce Abdul Razak Dawood.

“We would request the government to direct relevant ministries to extend the concessionary rates of utilities for the next three years.”

He pointed out that the export-oriented industry continued to receive a severe blow from the Covid-19 pandemic. He added that prior to Covid-19, the sector was already suffering due to stuck sales tax refunds and the present collapse of demand in the economy made it more challenging to achieve the high export target.

He praised the Ministry of Textile for taking several positive measures to save the export industry from total collapse such as providing timely relief and pressing the exporters’ case in government circles to improve Pakistan’s competitiveness.

If Pakistan is unable to maintain its cost competitiveness during these difficult times, it will not be able to regain the lost momentum. “The cost of manufacturing is a major element of our competitiveness, and fuel and power costs are main components of our cost of production,” he wrote.

He highlighted that the government gave subsidies to the traders and manufacturers, who exported 80% of their products to other countries. However, the facility was not extended to the traders and manufacturers, who sold merchandise to these exporters.

Stating the reason, he said it was done out of fear that domestic and international sellers would collaborate and sell their products in local markets while availing full benefits of export promotion.

“Owing to the same reason, the Federal Board of Revenue (FBR) withdrew the zero-rating facility given to exporters and slapped 17% sales tax, which will be refunded to businessmen,” he said.

“However, the exporters always complain that the refund system is not efficient, hence, it triggers a liquidity crunch.” The letter called for restoring the zero-rating facility for the exporters.

Published in The Express Tribune, July 8th, 2020.

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