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Budget 2024-25: Textile industry seeks zero duty on spare-parts, dyes, chemicals, generators

Khalid Mustafa
Saturday, May 18, 2024

ISLAMABAD: The export industry has proposed to the government a set of changes to the Customs Duty structure for the upcoming budget 2024-25 to give required impetus to the country’s industrial activities seeking zero duty on industrial spare parts, dyes and chemicals, and gas generators.

According to the proposals, shared with finance and commerce ministries and the FBR, continuation of duty-free import of cotton is imperative for the industry.

The payment of Export Financing Scheme (EFS) refunds under the ‘Faster’ system has also been stressed by the industry.

The textile industry also sought relaxation in the condition of value addition, arguing that many textile units purchased cotton at higher prices due to global recession, prices of cotton slumped drastically. In this scenario, the users of EFS are not in a position to meet the condition of 10 per cent value addition under Rule 872 (1)(a) of EFS 2021.

The industry also asked for withdrawal or lowering of import duty from PSF (polyester staple fibre) as it is the basic raw material for the textile sector. A duty of 7pc, coupled with an anti-dumping of 12pc, has resulted in rent-seeking by domestic producers of PSF by artificially increasing the local PSF prices which are approximately 20pc higher than the international prices. Using imported PSF as an alternative reduces the domestic share of value added. The duties on PSF have, as such, created economic distortions and disincentivised investment in MMF that is growing and lucrative international market.

Therefore, the rate of duty PSF must be reduced by 5pc, which will result in cascading reduction in the duty to 2pc. The anti-dumping duties must also be withdrawn in view of the ground realities. The industry also sought the zero duty on purified terephthelic acid (PTA) as it causes to higher prices of PSF.

The textile industry also sought the extension of EFS to the whole value chain of textile products. It also asked for withdrawal of Customs Duty from recycled or regenerated polyester suggesting the authorities to set up a separate a sub head in HS code for differentiation of recycled polyester from virgin polyester and import duty from regenerated polyester to promote the nascent industry.

It sought reduction in import duty of yarn to 2pc and withdrawal of anti-dumping duty to provide breathing space to the local producers of polyester yarn.

On the other hand, two main textile units of the country are also under quite stress due to the non-release of their imported cotton of 1,223 bales from the USA and Brazil owing to which they are facing Rs27 million demurrage charges from foreign companies.

In a letter, written to Dr Muhammad Fakhre Alam Irfan, federal secretary, Ministry of National Food Security and Research, it has been disclosed that two textile units – Fazal Cloth Mills Limited and Ravi Spinning Limited – imported 13 containers carrying 1,223 bales: five containers with 437 bales from the USA, and eight containers with 786 bales from Brazil.

The letter said that unfortunately, for reasons beyond the control of the consignee, the shipment was delayed at sea in transit.

Both have requested that these consignments in question should urgently be released, as it was not due to any fault by the importer.