Business

15% regulatory duty on yarn export withdrawn

Shahbaz Rana July 26, 2010

ISLAMABAD: The government on Monday withdrew 15 per cent regulatory duty imposed on the export of yarn after finding that arrival of fresh cotton crop will improve domestic supplies.

In its fifth meeting, the Cabinet Committee on Textile, headed by Finance Minister Dr Abdul Hafeez Shaikh, deliberated on issues related to cotton supply and production, export trend and availability of yarn for the value-added textile industry.

“After careful consideration of the situation, it was decided to let the duty regime on yarn exports expire on July 26,” the finance ministry announced.

The committee decided that it will carefully monitor domestic supply of yarn, will meet whenever expedient and may re-impose the duty, if needed.

“It is a premature decision. The government should have waited until the new crop hit the market,” said former textile minister, Mushtaq Cheema.

He said ultimately the government had to abolish the duty. “Had the government scrapped it after one month, it would have been better for the spinning industry.” Cheema said the government levied the duty too late but lifted it too early.

After hectic lobbying by the value-added sector, the government had slapped the duty two months ago on May 13. The latest decision is against expectations as the National Assembly and Senate Standing Committees on Textile had recommended continuing with the punitive duty at least till August 26 to ensure smooth supply in the domestic market.

The All Pakistan Textile Mills Association has long been lobbying to get the decision reversed. It had claimed that the spinning industry would have to bear a loss of Rs16 billion in subsidy and Rs4 billion in terms of export duty, totaling Rs20 billion in two months.

The textile ministry held consultations with all the stakeholders before reaching a final decision. It took viewpoints of growers, spinners and value-added textile manufacturers. Farmers had also demanded lifting of the duty, terming it discriminatory.

“It was an overdue decision. The government has finally realised that interference in the market is not in the interest of any stakeholder,” said Akbar Sheikh, former president of All Pakistan Textile Mills Association’s Punjab Chapter.

He said the decision to impose 15 per cent duty along with yarn export quota at 50,000 tons, later reduced to 35,000 tons, was irrational.

Published in The Express Tribune, July 27^th, 2010.

COMMENTS (2)

Munib Khalid | 14 years ago | Reply In the end it was prudent to remove the 15% duty on yarn exports. Any intervention by the government in the free market mechanism should be discouraged. The domestic cotton crop this season looks encouraging and the global cotton outlook is also bright. Expected cotton shortfall is China will be around 16 Million Bales (480-lb) in the coming season but the extremely positive outlook of US and Indian crop would ensure increase global production and assist China in bridging its cotton. The artificial increase in cotton prices witnessed recently is also on the decline. Plausible reason for this could be that the export oriented spinning mills were holding local sale of yarn in hope of getting better price when the 15% yarn duty expires but it may not happen due to increased expected cotton production in US & India, hence augmenting global cotton stocks.

Good-Man | 14 years ago | Reply Thank God and now spinners can feel relax to export their yarn again. And hence, I expect millions of dollars will be in flow once again because of export orders and 99% people will be happy with the decision.

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