The government”s decision to impose a 5 percent customs duty on cotton yarn import is unlikely to benefit textile sector as importers have already purchased a huge quantity of cotton yarn from India.
Sources said that there was a gap of three weeks between the proposal submitted by the Ministry of Textile and approval by the Economic Co-ordination Committee (ECC) of the Cabinet, which has benefited the importers. Ishan-ul-Haq of Pakistan Cotton Ginners Association said that the summary was submitted to the ECC on March 27, 2014 for consideration and approval, as reported in the media. The ECC approved the summary on April 17, 2014 after a gap of three weeks, which benefited the importers immensely, Ishan added.
Official documents available with Business Recorder reveal the ECC was informed by Textile Ministry that the import of cotton yarn has increased by more than 98 per cent from India during the first eight months of the current fiscal year as compared to previous years. In real terms, import of cotton yarn which was Rs 4.2 billion during July-February 2012-13 increased to Rs 9.2 billion during July-February 2013-14. Cotton Yarn import from which was 10,120,80 kg during July-February 2012-13 has increased to 20,097,295 kg in July-February 2013-14, reflecting an increase of 98.57 per cent.
The Federal Board of Revenue (FBR) has supported the proposal to withdraw the exemption on the grounds that the import of cotton yarn was granted exemption of 5 per cent custom duty on the recommendations of Ministry of Textile due to short term supply crunch of cotton yarn in 2010.
The FBR further stated that it has been observed that, recently, there has been significant jump in the import of cotton yarn from India . During last financial year, import of cotton yarn from India jumped by 286% compared to previous year ie from 4.9 million kgs to 19 million kgs. It is also well known that Indian cotton yarn is well subsidised as government of India extends 4% subsidy to exporters of this commodity. Moreover, India is also charging 10% customs duty on import of this commodity into India , thus protecting its local yarn industry forcefully. Pakistan, at present, is net exporter of cotton yarn, last financial year a quantity of 728 million kgs was exported out of total production of 2800 million kgs, thus leaving substantial quantity for local consumption and value addition for export.