Decisions: ECC scraps ban on gold import

Announces Rs2b Ramazan package, slaps 5% duty on cotton yarn import.

ISLAMABAD:

The government has imposed 5% customs duty on import of cotton yarn in an attempt to support domestic industries and decided to lift a ban on gold import that had been slapped last year to save foreign currency reserves and discourage its smuggling to India.

The decisions were taken by the Economic Coordination Committee (ECC) of the cabinet in a meeting held here on Thursday with Finance Minister Ishaq Dar in the chair.

The ECC also approved, in principle, a Rs2-billion package to subsidise kitchen items for poor people at state-owned utility stores in Ramazan.

It decided to withdraw a statutory regulatory order of 2010 under which textile industries had been allowed duty-free import of cotton yarn. The move is aimed at checking import of cotton yarn which has increased rapidly and the yarn industry of Pakistan has started feeling the heat of an extraordinarily liberal tariff regime, according to a handout issued by the Ministry of Finance.

In 2010, when the country was facing shortage of cotton, the then government waived 5% customs duty. However, the duty has been slapped at a time when cotton production is again falling short of the target.

The decision will greatly benefit ginning factories that have hoarded cotton by purchasing in bulk late last year.

At present, raw cotton is trading around Rs3,000 to Rs3,500 per maund (40 kg) while cotton yarn rates are above Rs6,000, depending on quality, according to market analysts.

The ECC also decided to lift the ban on the import of gold and gold jewellery, but tightened regulations for the importers aimed at discouraging smuggling to India. Under fresh regulations, imports in any one month are restricted to a maximum of 10 kg per exporter.

Previously, the penalty of default on export commitment was 5% of the duties levied, which the ECC found “practically nil”, as customs duty and sales tax on the import of gold was 0%.

It, therefore, decided that import authorisation under the savings clause would be cancelled, if the exporter failed to honour the export commitment within the stipulated timeframe.

It cancelled all import authorisations issued under the previous regulatory arrangements for those exporters, who did not opt for fresh registration or failed to apply for new jewellery passbook with effect from May 15.

The ECC also decided that the maximum amount of gold imported in any single transaction should not exceed 10 kg.

It approved, in principle, a relief package for Ramazan amounting to Rs2 billion. Last year, the Utility Stores Corporation (USC) had provided a subsidy of Rs1.65 billion and for this year it proposed Rs1.624 billion for the package.

However, the ECC approved Rs2 billion for the relief package and details of the relief on essential commodities would be submitted by the USC in the next ECC meeting.

The ECC withdrew its earlier decision on providing a mechanism for joint expert mediation between Sui Northern Gas Pipelines (SNGPL), power purchasers and independent power producers (IPPs) namely Saif, Sapphire and Orient. The three IPPs claimed Force Majeure Event (FME) under the respective Gas Supply Agreements (GSAs) from SNGPL because of its inability to supply gas to them due to the damage to one of its gas pipelines in a terrorist attack in 2011.

It was decided that since the IPPs were not willing to accept the out of scope collective mediation which was binding in nature, the dispute resolution mechanism of the respective project agreements may be followed.

Published in The Express Tribune, April 18^th, 2014.

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