The tariff, which comes into effect on November 1, was announced Saturday by Finance Minister Ishaq Dar after a series of meetings with the All Pakistan Textile Mills Association (APTMA) and representatives of the value-added sectors at the Federal Board of Revenue (FBR) headquarters in Islamabad.
Dar told reporters that the decision is designed to protect Pakistan’s textile sector—which of late has struggled to compete at home and abroad—and alleviate the grievances of the APTMA, which last week closed its 400 member spinning mills in protest against the government for increasing the power tariff and providing unfair advantages to Indian textile producers.
But the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has since criticized the move, calling it “a death warrant.”
PRGMEA Chairman Irfan Ali pointed out that the materials in question are already subject to a 5 percent customs duty; such an increase would raise the cost of goods produced by the value-added textile sector and likely make exports less attractive to overseas buyers.
In a message to the prime minister, finance minister and FBR, he wrote, “The government should provide a level playing field by reducing gas and power supply rates to the industry to help exporters cut their energy costs and release billions of rupees stuck in sales tax refunds.”
Due to gas shortages, Pakistan’s mills are not processing their fabric, he explained, thus sewing units cannot guarantee timely deliveries of export shipments.
He added, “We cannot compete with Bangladesh let alone India or China with this productivity level.”
Chaudhary Muhammad Nawaz, president of the Faisalabad Chamber of Commerce and Industry, agreed, saying APTMA represents only one segment of spinners.
“The imposition of duty on imports of yarn is highly detrimental to the value-added textile sector which was earning precious foreign exchange despite the daunting internal and external challenges,” he told reporters.
Earlier this year, the Institute for Policy Reforms (IPR) cautioned that frequent energy shortages, the rising cost of electricity, gas and raw materials and an appreciating rupee could cause Pakistan to lose an even greater share of the global apparel market.