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APTMA's role in textile and exports

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Black sheep sabotaging good economic policies

Aug 07 - 13, 2000

Inspite of Industry's and present government's desire to promote textile production and exports, the local textile industry continues to be hindered due to operational problems which urgently need to be removed by the government.

This was observed at a recent meeting organized by All Pakistan Textile Mills Association (APTMA). There was a feeling among the participants of the meeting that some black sheep present in the government machinery are bent upon to sabotage the productivity of some good economic decisions. Issuance of SROs and notifications counter productive to the government policies were the best example of such elements creating hindrance for economic growth in the country.

This Press briefing was organized to brief about the problems faced by the textile industry especially on the eve of the new textile policy, which is likely to be announced on August 12.

Elaborating the situation, Mirza Ikhtiar Beg, spokesman of APTMA said that after six consecutive years of crop failure, the year 1999-2000 saw a production of 10 million bales of cotton. Due to significant cotton availability at reasonable prices, the textile industry turned around profitability increased in production and exports were visible. Return to profitability has led to ploughing back of profits resulting in investment in BMR of $500 million. For the year 2000-2001 an investment of over one billion dollar is expected.

Regarding the present set up of the economic managers in the country, APTMA feels that they are competent yet the implementation of the policy is generally failed to be translated, in letter fand spirit especially in the SROs and notifications issued by the CBR.

Pointing out the problems faced by the industry, Ikhtiar Beg said that a large number of refund claims of textile industry are pending since January/February 2000 blocking a huge amount of textile units. This uncalled for delay is seriously affecting the liquidity as well as the viability of the textile units. He suggested that since 90 per cent cotton consumed within the country is exported in one form or the other, cotton should be exempted from payment of sales tax and the sales tax chain should start from the spinning (yarn manufacturing). The exporters of yarn, cloth, made ups and other textile should be allowed to clear their goods in Forms similar to Central Excise Form AR-3.

He said that new sales tax rules notified vide SRO 417(1)2000 dated June 20, 2000 are very lengthy and cumbersome. The rules not only ask for volume of documents to consider sales tax refund claims but also provide extraordinary discretionary powers to sales tax offices to scrutinize the genuine of the claims. Stage wise refund have been provided in these rules and only 50 per cent of the claims amount is payable after 3 days and the rest over long period subject to verification and audit. Hence the new rules will block the liquidity and choke the cash flow of the exporters.

It is proposed that SRO 417(1) 2000 should be suspended till September 30, 2000 and to make the rules workable, new refund rules should be formulated in consultation with the representatives of exporters.

INCOME TAX: The Income Tax Department is also adding to the liquidity problems by not releasing even the determined Refunds on one pretext or the other. He urged the government that all determined refunds should be released without any delay.

The government created two zones for textile industry at Karachi and Lahore. These zones will look after the matters relating to textile industry including issuance of exemption certificates U/S 50(4) and 50(5) of the Income Tax Ordinance 1979. This arrangement will create lot of problems for the textile units located in many areas other than Karachi or Lahore, some of which are far-flung and remote areas. Under the new arrangements, personnel of the mills will have to commute to the zones from far-flung areas. It may be noted that powers to issue tax exemption certificates have been withdrawn from all zones from July 1, 2000 although the newly created zones have not yet started operations at Karachi and Lahore.


APTMA suggested that powers to issue tax exemption certificates and carry out other tax related business should be allowed to be handed by income tax officers at Karachi, Lahore, Faisalabad, Multan, Peshawar and other cities where offices of the textile mills are located.

He also regretted that despite the assurances held out by the Governor State Bank of Pakistan regarding withdrawal of Refinance Facility from Grey Fabrics, the issue is still hanging and the exporters are disturbed and feel that this will seriously affect the exports.

It may be mentioned that government had announced withdrawal of refinance facility from Grey fabrics in trade policy announced on June 29, 2000. To implement the decision SBP issued a circular on June 30 excluding all types of cloth falling under Harmonized Code from the purview of exports Refinance Scheme including Bleached, Dyed, Printed and Denim fabrics. Denim Fabrics is a significant value added item.

When APTMA brought the issue to the notice of Governor SBP, he agreed and confirmed that denim fabric is a value added item and assured to discuss the matter with the minister, however no decision in this regard has been taken so far.