Pak textile ministry opposes restoration of duty on cotton import

The Ministry of Textile Industry in an attempt to safeguard the interest of textile manufacturers, has opposed the restoration of duty on cotton imports but this move will affect farmers, as incentives for cotton import will make their produce less appealing.

In the last fiscal year, the agriculture sector performed below par because of lack of interest on the part of government, which is considered pro-industry.
Moreover, the textile ministry, mainly looks after the interest of industrial sector, has a natural clash of interest with the agriculturists. It has forged no linkages with the agricultural community and all issues related to research on seeds and other inputs are being dealt with by the Ministry of National Food Security and Research.

In a meeting of the Economic Coordination Committee (ECC) held on May 16, the Finance Division recalled that the ECC had decided in April to constitute a committee, headed by Board of Investment Chairman Miftah Ismail, which would review the proposal of re-imposing duty and sales tax on cotton import and submit its report.

The committee would comprise commerce secretary, finance secretary, textile industry secretary and national food security and research secretary. The Finance Division said the committee held its meeting on May 5 where the textile industry secretary insisted that the incentive package given by the government had restored confidence of the textile industry.

Making the case for duty-free cotton import, the textile secretary pointed out that Pakistan’s cotton demand was estimated at 14 million bales whereas it produced only 10.6 million bales last season, reflecting a shortage of 3.4 million bales.

He said millers had so far imported 1.7 million bales, but still 2 million bales more were needed. Hence, an abrupt reversal of incentives would send negative signals to the market.

However, after comprehensive discussion, the committee recommended that the government may restore the duty and sales tax on cotton import instantly, but it should be applicable from August 15.

The Finance Division sought ECC’s approval for the recommendation of the committee. The ECC agreed to restore the duty and sales tax on cotton import from July 15, 2017.

In March 2017, textile exports grew 6.16% to $1.06 billion compared to the corresponding period of previous year. Earlier, textile exports were unimpressive and stood at $13 billion in financial year 2012-13, but dropped 2% and 7.4% in financial year 2014-15 and 2015-16 respectively.