PYMA rejects 5% duty on yarn

Appeals to PM to reverse decision that could lock 0.8 million power looms

KARACHI:

The Pakistan Yarn Merchants Association (PYMA), on Saturday, rejected the Economic Coordination Committee’s (ECC) decision to impose 5% regulatory duty (RD) on Polyester Filament Yarn, the primary raw material of textile industry.

Blaming the government for taking this anti-industry measure, PYMA warned that the move will lock around 0.8 million power looms, the lifeline of Pakistan’s textile industry.

In a press conference on Saturday, PYMA Senior Vice Chairman Sohail Nisar strongly protested against ECC’s decision to impose RD on yarn and appealed to Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar to suspend the ECC’s decision to save the Small and Medium Enterprises (SME)s from destruction.

Speaking to the Express Tribune, Topline Securities Research Analyst on Textile, Nasheed Malik said, “The government is imposing the RD on Yarn in a bid recover its lost revenue caused by the shrinking demand for textile from major buyers Europe, the UK and US. This is challenging for the textile industry’s competitiveness.

“The EU and UK are suffering from inflation while the US has excessive inventory,” observed Malik, adding that, “The US had already made procurements keeping in view the international supply chain disruptions on account of Covid-19. However, the supply chain has corrected itself with the course of time.”

The textile exports dropped by 19% year-on-year to $1.40 billion during November 2022, however, it grew 3% month-on-month. During the five months of fiscal year 2023, Pakistan’s textile exports were recorded at $7.4 billion, a decrease of 4% year-on-year.

Insight Securities Textile Analyst Ali Asif attributed the decline in textile exports to inflationary pressure, expected decline in textile product prices and higher inventory pileup in the exporting regions, especially the US and European countries

“The government is requested to issue directives not to impose RD on yarn in the best economic interests of the country. Otherwise, SMEs will be shut down and millions of workers will be unemployed,” said Nasir Hayat Magoon, former president of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI).

“There is already 11% custom duty on polyester filament yarn,” he pointed out, adding that, “With 5% RD, the duty will jump to 16%, while fabric is also the subjected to 16% duty. As a result of the imposition of RD, 0.8 million power looms will be locked as millions of workers will lose jobs while two million households will be pushed into poverty.”

The PYMA leaders warned that they will continue their protest against the ECC’s imposition of 5% RD on yarn until the decision is withdrawn. PYMA, along with the power loom owners of Karachi, Hyderabad, Tando Adam, Lahore, Multan, Faisalabad and the Pakistan Art Silk Factories of Gujranwala, are protesting the imposition of RD.

“It is unfair that the National Tariff Commission (NTC) sent its recommendations without any consultation with stakeholders. The NTC must listen to us and decisions must be taken in consultation with us,” urged Javed Khanani, Vice Chairman of the PYMA.

The PYMA leaders pointed out that, “Although local producers make only 25% of the total demand of polyester filament yarn, the textile industry has to depend on 75% of imported yarn. They further said that with inflation, high electricity and gas tariffs, labour issues, if more taxes are imposed on industries, unemployment will increase and the government will have to pay many times more for 5% RD.”

They appealed to the prime minister and finance minister to maintain the current duty structure on yarn and requested them to direct the ECC to avoid imposing regulatory duty on yarn.

“Instead of taking measures that are damaging for economic activities, policies should be formulated to promote business and industrial activities, and create employment opportunities,” said Mohammad Usman, Senior Vice President for PYMA.

Published in The Express Tribune, December 4^th, 2022.

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