ISLAMABAD: Ministry of Commerce has constituted an eight-member Inter-Ministerial Committee (IMC) under the convenership of Advisor to Prime Minister on Commerce and Investment, Abdul Razak Dawood to deliberate on the Textile and Apparel Policy 2020-25.
The IMC, also comprising Minister for Energy, Hammad Azhar; Minister for Industries and Production, Khusro Bakhtiar; Secretary Finance, Secretary Commerce, Secretary Power and Secretary Petroleum and Chairman FBR, will submit viable recommendations to the Economic Coordination Committee (ECC) within two weeks for consideration.
The ECC, in its meeting held on October 11, 2021 had constituted the IMC but its notification was issued on October 15, 2021. The first meeting of the IMC is scheduled to be held on October 20, 2021 in the Ministry of Commerce.
Well informed sources told Business Recorder that Minister for Energy, and Minister for Industries and Production had opposed some of the incentives proposed in the much-delayed policy, and its consideration has been delayed again and again on one pretext or another. In pursuance of decisions of the ECC of the Cabinet deliberations were carried out with stakeholders and changes duly been incorporated by the Ministry of Commerce in its revised draft policy.
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Manufacturing industry in Pakistan has been complaining about competitiveness vis-à-vis competing countries. Recently government extended considerable facilitation to textile and apparel sector; however, it has not brought much investment which suggests that long-term profitability needs to be restored to attract investment especially by SMEs.
According to the draft policy, electricity will be provided at US cents 9/kWh all-inclusive and RLNG at S6.5/MMBTU all-inclusive for the FY 202l-22 and concessionary regime will continue at regional competitive energy rates for five years after deliberation with stakeholders. Ministry of Commerce will continue DLTL/ DDT scheme for technical textiles, apparel and made-ups only; however, it will be de-linked with increment in exports. Further, diversification within products and markets will be offered as additional duty drawback.
Further, to attract investment, textiles and apparel machinery which has been customs duty free since the first textile policy period will be continued. Additionally, Ministry of Commerce will conduct an exercise with Ministry of Industries and Production on spare-parts which are not manufactured locally and their customs duty will be rendered zero.
Commerce Ministry is also of the view that tariffs have been kept high to encourage investment in upstream value-chain. Nevertheless, high tariffs encourage domestic sales and inefficiencies are induced in pricing. To encourage exports of value-added products and product diversification, Ministry of Commerce will take following measures on priority: (i) tariff structure of entire textiles and apparel chain including man-made fibre (MMF) and cotton-based value-chains will be rationalized on priority followed by accessories and dyes and chemical; (ii) Customs duty drawback rates of textiles and apparel products will be reviewed taking into account additional customs and regulatory duties; and (iii) temporary importation schemes will be simplified in perspective of SMEs.
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Ministry of Commerce will ensure common warehousing, include indirect exporters in temporary importation schemes and pursue FBR to devise new temporary importation scheme to cater to fast fashion trends.
Ministry of Commerce in consultation with SMEs and large sale industry will review federal, provincial and other or organisations-based taxes/cess and provide recommendations to the government to rationalize them to reduce the cost of manufacturing. Federal taxes will be reviewed jointly with the FBR.
The sources said the IMC will review electricity and gas tariffs proposed in the policy whereas SMEs are expected to be removed from the policy as Ministry of Industries and Production is also fine tuning its own SME Policy.