All Pakistan Textiles Mills Association (APTMA) rejected budget 2020-21
Industry might contract by 30-40% and 1.5 million jobs may be lost
All Pakistan
Textiles Mills Association (APTMA) has rejected the budget proposals 2020-21.
APTMA has issued a press release in which request has been made to the
government to resolve the problems and issues faced by the textile industry.
APTMA has
requested the PTI government to reduce the electricity and gas tariffs and
restoration of zero rated policy and other initiatives to solve the problems of
textile industry.
The APTMA
has said that proposed budget for FY 20-21 has completely failed to address
serious industry issues in the light of the worldwide Covid-19 created crisis.
This is
likely to lead to large scale unemployment and closures and as the market
dynamics have changed Post Covid; Bold and direct steps were required to retain
our export earnings and maintain employment in a shrinking world Market due to
lack of demand especially textiles which constitute 60% of export earnings.
Our
Balance of Payments position is likely to worsen as a result of the lack of
appreciation of the issues facing exports and the expected 20% drop in
remittances (World Bank estimate) due to large scale layoffs in the Gulf
countries and Saudi Arabia.
Resolution
of followings is requested at earliest;
1. Provision
of Regionally Competitive Energy Prices
- Continuation of regionally
competitive fixed electricity tariff at 7.5cents/KWh and $ 6.5 per MMbtu
for RLNG/gas across the value chain to ensure competitive export pricing.
- Non continuation of regionally
competitive energy rates will lead to direct closure of around 30 percent
of factories within six months.
- Unless corrected, as of July
1st, 2020, exporting sectors will be charged Rs 24 / kwh as normal B3
industrial tariff instead of Rs 12 earlier and even if RLNG is continued
at $ 6.5 /MMBTU this contrasts with $ 3.5 RLNG /Gas tariff for India and
Bangladesh. Meanwhile Electricity Prices in India have seen a further drop
of 16% over the last 2 months while currently averaging about 7.2
cents/kwh for Industry. Energy accounts for 35% of conversion costs in the
Textile value chain and therefore competitive pricing of exports is very
highly sensitive to Energy pricing.
- It had been agreed that Rs 20 billion will be allocated for energy for use in maintaining 7.5 cents / kwh for electricity and $ 6.5 / MMBTU for RLNG/ Gas. The budget however only allocates Rs 10 billion for RLNG.
- Competing countries are already
poised to combat highly competitive market conditions through cheaper
electricity and gas rates.
- 2. Zero Rating/ 17 percent GST
Continuation of 17 percent GST
is not sustainable as by design GST refunds of 5 months remain in
pipeline.
- As a result, Rs 20 billion per
month has shifted from the coffers of the industry to FBR (amounts to Rs
100 billion plus which is in process at all times).
- This has increased the cost of
doing business by about 6%.
- Sales tax exemption on imports
through Bond, EOU & DTRE would be withdrawn immediately.
- 17% is a very high-level
incentive to cheat. A lower rate would; (a) Allow Proper
Documentation (b) Increase FBR Revenue through wider application
(c) Allow organized domestic retailers to compete in the 13
Billion dollars domestic textile market.
- We therefore requested the
government to restore zero rating or to reduce sales tax rate to 5% across
the value chain.
- 3. 1.5 percent Turnover Tax/ Minimum Tax
This tax increases cost of
exports by an average 5-6 percent as the tax is levied on the same goods
multiple times as it passes through the value chain.
- The Textile Industry works on
very slim margins and turnover tax acts as an accelerator to early closure
of mills.
- Continuation of 1.5 percent
turnover tax in a situation where there will be no profitability is
completely unjustified.
- 4. MMF & Polyester Staple Fiber
There is 7% customs duty on the
import of polyester staple fiber with total import expenses in the range
of 20% including anti dumping duty.
- Polyester staple fiber is a raw
material of the industry and as repeatedly committed by the government
should not be subject to any duties.
- More than 60% of world textile
trade is in MMF materials and this duty protection given to obsolete
plants in Pakistan is denying the Pakistani industry any chance to compete
in this growing majority section internationally or domestically.
- Any protection to domestic
polyester plants may be given directly by the government and not at the
cost of our country’s economic future.
5. DLTL
- With refunds of approximately 5
percent due on $ 10 billion exports the quantum of DLTL due will be Rs 80
billion. This was also the amount requested for allocation by Ministry of
Commerce.
- The budget has allocated only Rs
10 billion for DLTL. DLTL is a calculation of government taxes component
in the cost of exports and if this is not catered for will further weaken
our export competitiveness.
6. TUFF
- Rs 4.5 billion are pending under
TUFF scheme.
- Whereas amount allocated in this
budget for TUF scheme is only Rs 400 million.
- The amounts have been due for
the past 7 years and this sort of delay annuls industries’ faith in
Government commitments.
7. New Textile Policy
- Implementation of the in
principle approved Textile Policy is required in true letter and spirit
for Pakistan to maintain and increase employment and exports.
It may
please be noted that without correction of these issues in the budget
proposals, the industry will contract by 30-40 percent and well over one and
half million people will lose their jobs.
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