The foreign consumers have choices to buy a Pakistani or Bangladeshi product so any unilateral price increase by Pakistani producers will hurt their profit margins. PHOTO: FILE
The textile sector, especially the producers of finished textile products, has urged the government to reduce the percentage of Gas Infrastructure Development Cess (GIDC), stressing that the sector cannot share its burden with the consumers in export markets.
The federal government on Tuesday notified the levy of GIDC at different rates on all industrial consumers in which it levied Rs100 per mmbtu on general textile consumers of gas while Rs150 per mmbtu has been notified for those textile mills that have captive power plants.
“Textile mills, especially the producers of finished textile products, will not be able to sustain this tax as they cannot pass through this cost increase to their foreign buyers,” said a managing director of one of the country’s leading composite textile mills from Karachi.
The government has slapped GIDC on other sectors as well but these have their customers inside the country so when all competitors pass on this increase, it will not hurt any specific player. However, most of the textile sector’s customers are in the export markets over which they have no control. The foreign consumers have choices to buy a Pakistani or Bangladeshi product so any unilateral price increase by Pakistani producers will damage their profit margins, he explained.
Pakistan Apparel Forum Chairman Jawed Bilwani commented that the levy of Rs100 to 150 mmbtu on textile sector will not bode well for the export-oriented textile industry. “We have been continuously trying to tell the government that the increase in utility prices is directly hurting the profitability of the value-added textile sector,” he added.
Earlier, the government wanted to levy a uniform rate of Rs300 mmbtu for all sectors that are using natural gas. At present, the textile industry is paying Rs100 per mmbtu.
GIDC was introduced by the previous government to finance the Iran-Pakistan gas pipeline when foreign lenders, fearing US sanctions, refused to finance the multi-billion dollar project. The Nawaz Sharif government carried on this tax and it has now enforced different rates on different sectors.
The proposed increase of GIDC for textile from Rs100 to Rs300 per mmbtu was the only irritant announced for this sector in the recent 2015 budget.
Otherwise, the textile sector received a strong package full of incentives from the government in the budget.
Published in The Express Tribune, June 19th, 2014.
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