Policy Grievances Marked 2017 In Pakistan’s Textile Sector

Grievances against government policies and regulations from all quarters of the textile industry and demands for amendments marked the year in Pakistan despite former Prime Minister Nawaz Sharif announcing a special package for textile exporters in early 2017. Cotton production crossed 10 million bales in the world’s fourth largest cotton producing country. Dipesh Satapathy offers a recap.

Cotton production reached 10.685 million bales as of December 15, a 5.3 per cent rise over the corresponding period last year, according to the Pakistan Cotton Ginners Association (PCGA).

The PCGA urged the government to introduce a five-year cotton policy to raise production to 22 million bales and exports to 3 million bales through crop insurance incentives and quality premium for farmers. Drawing attention to the issue of government and private enterprises failing to supply qualitative, well-germinated and heat- and virus-resistant seeds to the farmers, PCGA said the area under cotton crop should be increased to 4.2 million hectares from the current 3.2 million hectares.

Former Prime Minister Nawaz Sharif announced in January a Rs 180-billion package to boost the country’s textile and apparel exports. The package included tax-free import of cotton and man-made fibre, and duty drawback on exports of fabrics, made-ups and garments against realisation of import proceeds. A revision to the package was announced in October.

However, the year saw complaints from various quarters against the improper and delayed implementation of the package and several other government policies.

The Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA) in November urged Prime Minister Shahid Khaqan Abbasi to personally direct an early release of funds to implement the package as non-payment of refunds and a sharp rise in cotton yarn prices had adversely hit the value-added textile sector.

Criticising the finance ministry and the Federal Board of Revenue (FBR) for delaying the package and terming funds blockage as the primary reason behind the continuous drop in exports, PRGMEA urged the government to release funds to the central bank for disbursement of duty drawback of taxes to the exporters.

In December, Pakistan Hosiery Manufacturers and Exporters Association (PHMA) appealed for withdrawal of duty on the import of cotton yarn, a raw material for the value-added knitwear sector, following the proposed withdrawal of custom duties on raw cotton import from India. The sharp rise in cotton yarn prices has hit the value-added garment sector hard. The package had declared a number of incentives on cotton yarn import, but no such step has been implemented so far, said PHMA.

Associations representing the value-added textile export sector expressed concern over the delay by the State Bank of Pakistan (SBP) in announcing the procedure for applying duty drawback of taxes (DDT) claims under the revised package more than a month after its announcement.

The PREGMEA in September demanded revision of the textile policy by formulating regulations for specific sectors therein to tackle decline in exports. Foreign buyers are demanding new garments based on raw material, which are neither available in Pakistan nor produced by Pakistani weavers.

Expressing concern over suspension of the supply of system gas quota of two-day per week to Punjab industries from December 7, the All Pakistan Textile Mills Association’s (APTMA) Punjab unit said the government had extended this quota last year to reduce the cost of business and address the inter-provincial disparity. While industries in Khyber Pakhtunkhwa and Sindh provinces continue to be supplied system gas for seven days a week, the same was being denied to the textile industry in Punjab, where factories are using more expensive imported regasified liquefied natural gas.

APTMA in September also urged the government to remove the gas infrastructure development cess and provide gas at the regionally competitive rate of PKR 400 per a million British thermal units. The spinning and weaving sectors are facing the brunt of high cost of doing business and this has made them unviable, it said.

The association in November wanted immediate withdrawal of restrictions, such as the 4 per cent customs duty and the 5 per cent sales tax, on import of cotton to allow the industry to meet the requirement of quality products by international buyers. Non-tariff measures on import of cotton from India and Brazil should also go as the industry badly needs contamination-free fine and medium staple cotton to produce export-quality goods, it said.

The National Tariff Commission was criticised by the Pakistan Yarn Merchants Association (PYMA) in November for imposing anti-dumping duties between 3.25 and 11.35 per cent on import of polyester filament yarn (PFY) from China and 6.35 per cent on such imports from Malaysia. Three-fourths of the domestic requirement of such yarn is met through imports.

The APTMA in October opposed the suggestion to stop the 4 per cent rebate on yarn exports on the basis of drawback of duties, local taxes and levies on exports. Export of yarn needs patronage, else it may lead to closure of mills. The spinning sector is incurring losses now by selling yarn below its cost due to poor demand from domestic consumers, APTMA feels. As the domestic industry consumes around 70 per cent of the total yarn production, a substantial amount is left unsold, and needs to be exported.

The International Apparel Federation opened its first regional office at the PRGMEA House in Sialkot in September. It will extend support to Pakistani apparel firms in exports, capacity building and compliance. PRGMEA also signed an agreement with the Dutch National Fashion & Textile Association Netherlands on the occasion to support the Pakistani apparel industry. In August, PRGMEA considered setting up a Pakistan Apparels Export Council to facilitate business in the sector.

In September, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) urged the United States to extend the generalized system of preferences (GSP), valid till December 2017, to December 2020 and include textile products under the facility.

Opposing the government proposal to impose 5 per cent regulatory duty on the import of polyester filament yarn (PFY), the PYMA demanded revival of the polyester filament fabric industry. There is already a 6.23 percent (on average) anti-dumping duty on the Chinese PFY and a high customs duty on that. There is only 25 per cent domestic production of polyester fabric against its total requirement.

The Australian Government, Cotton Australia and the Better Cotton Initiative (BCI) together launched a partnership in January to support the training of approximately 225,000 cotton farmers in Pakistan, beginning this year. PGMEA also kept itself busy preparing to establish the Pakistan Readymade Technical Training Institute (PRITI) that needs an investment of Rs 125 million.

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