APTMA warns of industry collapse

Cites misuse of EFS; local manufacturers face closures, workers lose jobs

KARACHI:

The All Pakistan Textile Mills Association (APTMA), Southern Region, has sounded the alarm over the misuse of the Export Facilitation Scheme (EFS), warning of widespread closures and mass unemployment in the domestic textile industry.

In a statement issued Monday, APTMA highlighted how the scheme, which exempts imported cotton and blended yarns from sales tax and duties, is being exploited. Instead of being used solely for export manufacturing, large volumes of these imported yarns are being sold in the domestic market. This has created an uneven playing field, pushing local yarn manufacturers into financial ruin and causing the closure of over 40% of spinning mills.

"Unscrupulous elements are evading taxes under the guise of exports, leading to massive revenue losses for the government and crippling the domestic industry," APTMA said. The misuse has resulted in the loss of hundreds of thousands of jobs, further compounding the industry's woes. APTMA criticised the withdrawal of zero-rating on local supplies for export manufacturing under the Finance Act 2024, calling it counterproductive. "While intended to enhance revenue, it has instead triggered a decline in business activity, further squeezing government revenue collection," the statement noted.

High energy costs and delayed tax refunds have added to the industry's burden. Domestic manufacturers face an 18% sales tax on supplies, which exporters increasingly bypass by purchasing tax-free imported inputs. Although refunds are promised, delays by the Federal Board of Revenue (FBR) impose a hefty opportunity cost of 20% per annum, APTMA added.

The association also pointed to illegal dumping of duty-free yarn in local markets, making it impossible for domestic manufacturers to compete. This, combined with declining cotton production and skyrocketing energy prices, has left the spinning sector on the brink of collapse.

"If immediate action isn't taken, this crisis will spill over to other sectors, including weaving and processing, dismantling Pakistan's once-thriving textile value chain," APTMA warned.