PM urged to reject yarn exclusion from EFS

The Pakistan Textile Council (PTC) has urged Prime Minister Shehbaz Sharif to reject demands seeking the exclusion of all yarns and fabrics falling under Chapters 52 and 55 of the Pakistan Customs Tariff from the Export Facilitation Scheme (EFS), warning that accepting them would cause serious and lasting harm to the country's value-added exports, according to a statement issued on Tuesday.

Copies of the letter, signed by PTC Chairman Fawad Anwar, have been sent to the Federal Board of Revenue (FBR) chairman and the secretary, Ministry of Commerce.

In the letter, the council said it fully supported government action to curb misdeclaration and misuse of the EFS, but noted that associations representing businesses focused on the domestic market are now seeking further exclusions. Raw cotton, cotton yarn and grey cloth were removed from the scheme in 2025 through SRO1359(I)/2025.

PTC pointed out that these demands are contrary to the understanding reached during earlier consultations that no further exclusions would be sought.

"Accepting these demands would cause serious and lasting harm to Pakistan's value-added exports," Chairman Fawad Anwar stated in the letter.

The council highlighted that global textile and apparel demand has moved firmly towards man-made fibres (MMF). According to Textile Exchange's Materials Market Report 2025, synthetic fibres accounted for 69% of global fibre production in 2024, while cotton's share fell to 19%.

MMF-based products account for about 63% of global textile and apparel trade, but only about 12% of Pakistan's textile and apparel exports. Competing countries are expanding rapidly in this segment, with Bangladesh targeting an increase in the MMF share of its apparel exports from about 24% to 40% by 2030.

The letter noted that Pakistan has almost no viscose or lyocell fibre production, while the domestic polyester value chain carries cost and scale disadvantages against Chinese and ASEAN producers. Value-added exporters therefore rely on imported MMF yarns and fabrics, many of which are specified by international buyers, to secure and deliver orders.

PTC warned that the 2025 exclusions already require exporters to pay taxes upfront on those inputs, adding to liquidity pressure and production costs. Excluding all yarns and fabrics under Chapters 52 and 55 would raise input costs and lock up working capital for apparel and made-ups exporters, restrict access to the fibres that drive global apparel demand, discourage investment in new value-added and MMF-based capacity, and weaken buyer confidence in Pakistan as a stable sourcing destination.

On misuse, PTC reiterated its full support for firm action against misdeclaration, under-invoicing and diversion of EFS imports into the domestic market.

The letter stated that FBR and Pakistan Customs have the legal powers, systems and personnel to detect and prosecute such cases, and that recent detections show enforcement is effective.

"The misuse of a few cannot justify penalising genuine exporters or dismantling a scheme that is central to export competitiveness," the chairman added.

PTC requested the prime minister's intervention on three points: EFS should remain available for all legitimate export inputs, with no further exclusions of yarns or fabrics under Chapters 52 and 55; FBR should strengthen enforcement through input-output coefficient audits, reconciliation of EFS imports against export documents, risk-based examination and strict penalties for offenders; and concerns of domestic suppliers should be addressed by restoring zero-rating on local supplies of inputs to EFS users, rather than by taxing imported inputs.

PTC stated that textiles and apparel remain Pakistan's largest export sector and that its growth depends on competitive access to the inputs the world market demands. The council reaffirmed its commitment to working with the government to curb misuse while protecting the genuine exporters who earn foreign exchange for the country.