Latest news with #ExportFacilitationScheme
Express Tribune
4 days ago
- Business
- Express Tribune
Tariff cut on chemicals, plastic stokes concerns
Poly Vinyl Chloride Resin is a chemical used in production of a dozen plastic, leather and cable goods. PHOTO: AFP Listen to article The chemical and plastic manufacturing sector has voiced serious concerns over the proposed tariff reduction on the import of chemicals and plastics. According to industry experts, such changes could trigger an irreversible decline in a sector that forms the backbone of Pakistan's industrial value chain. The local industry has urged the government to maintain the current tariff regime for fiscal year 2025-26 and initiate broader, multi-stakeholder dialogue before making long-term changes. The chemical industry contributes 3-4% of national gross domestic product (GDP) and supports over 300,000 direct and indirect jobs. Annually, it enables import savings of over $7 billion, makes exports of $1.2 billion and pays more than Rs700 billion in taxes and duties. Industry players claim the sector is already on the verge of collapse due to structural disadvantages including high energy tariffs, exorbitant raw material costs, elevated capital costs and heavy taxation. Gas prices in Pakistan have increased nearly fourfold in the last three years for most captive power plant-based chemical players, rendering them uncompetitive versus peers in other countries. Adding to this challenge is a corporate tax burden of approximately 37%, far higher than the average rate of 20-25% in countries like Vietnam, Bangladesh and India. Despite these challenges, listed companies in the industry have collectively invested Rs100 billion in the last three years to expand production capacity and improve operational efficiency. Stakeholders have asked the government to maintain the current tariff regime for FY26 and begin broader consultations. The case for tariff reduction is a hypothesis, which suggests that reduced duties will start Pakistan's journey towards export-led growth. This theory is contestable. There are several petrochemicals like polyethylene (PE) and polypropylene (PP) that have minimum duties today; if lower tariffs could drive exports, Pakistan would have tangible PE and PP downstream product exports, which is not the case. On the contrary, the export of petrochemicals protected through tariffs is higher. Two petrochemical companies were also among top 50 exporters in 2023 because they invested over and above the local market and were able to export surplus products and generate foreign exchange, a path that India follows to date. It is also important to note that anything imported for exports is duty free under the Export Facilitation Scheme, which means tariffs don't affect exports. Critics argue that export schemes are complex, but that's not the case; if a company can't manage documentation for export schemes, it's unlikely they'll compete in the global trade system, which requires extensive compliance and documentation. As Pakistan considers reforms to stimulate long-term growth, many in the industry are advocating deeper consultation. Industry players say tariff changes must be part of a broader, sequenced industrial policy, not standalone interventions.
Business Recorder
6 days ago
- Business
- Business Recorder
Weekly Cotton Review: Market shows signs of stability
KARACHI: The cotton market has shown signs of stability, with business activity also picking up. The spot rate has increased by Rs 300 per maund, marking a positive trend for traders and growers. Several ginning factories in Sindh and Punjab have partially resumed operations, while approximately 20,000 to 25,000 bales of phutti (seed cotton) have already arrived at ginning facilities. However, the textile and cotton ginning sectors are facing pressure due to recent budget measures. The continuation of sales tax on cotton, phutti, and other by-products, along with the decision to keep imported cotton tax-free, has negatively impacted the industry. Ehsan ul Haq, Chairman of the Cotton Ginners Forum, stated that these policies are having adverse effects. Abid Zaidi reported that authorities are closely monitoring the cotton crop situation in Pakistan. Agricultural experts from the CCRI Multan have issued recommendations for cotton growers, valid until June 30. Sajid Mahmood explained that the guidelines provide detailed instructions on crop maintenance and strategies to address potential challenges. During the past week, the local cotton market witnessed overall price stability with relatively better trading activity. In Sindh province, cotton prices ranged between Rs 16,300 to Rs 16,700 per maund, while in Punjab, prices stood at Rs 16,800 to Rs 17,200 per maund. Meanwhile, phutti (seed cotton) was traded at Rs 7,700 to Rs 8,500 per 40 kg in Sindh and Rs 8,000 to Rs 8,800 per 40 kg in Punjab. Currently, two to three ginning factories are operational in both Sindh and Punjab, leading to increased cotton trading. Several mills are actively purchasing new cotton, while the arrival of phutti has also been gradually rising. In the recent budget, the government eliminated the Export Facilitation Scheme (EFS) for the textile and ginning sectors on the import of cotton and fabric. However, ginners had hoped for the removal of multiple taxes imposed on them, but the budget only introduced an 18% sales tax on yarn imports. While the All Pakistan Textile Mills Association (APTMA) has appreciated some measures, ginners expressed significant disappointment as most existing taxes on them remain unchanged. The negative impact of these taxes is expected to extend to cotton growers, who have also expressed dissatisfaction with the budget decisions. The EFS facility for importing cotton and fabric is currently available, which is expected to negatively affect the local cotton industry. Since an 18% sales tax is imposed on local cotton, the market will struggle to gain momentum, directly impacting cotton farmers. If cotton prices decline, the rates for cottonseed (phutti) will also drop. Additionally, with high input costs for cotton growers, there are concerns that cotton cultivation may decrease this season. This year, major mill groups have already signed large-scale import contracts for cotton, leading to relatively lower purchases of local cotton. As a result, ginners and cotton farmers will see reduced demand for both phutti and raw cotton, and prices are expected to remain unfavourable. The situation may further discourage cotton production in the coming season. In Sindh, the price of cotton per maund ranged between Rs16,300 and Rs16,700, while phutti (seed cotton) for 40 kg was sold at Rs7,700 to Rs8,500. Meanwhile, in Punjab, cotton per maund was traded at Rs16,800 to Rs17,200, with phutti (40 kg) priced between Rs8,000 and Rs8,800. The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs300 per maund, closing the spot rate at Rs16,500. Naseem Usman, Chairman of the Karachi Cotton Brokers Forum, reported that international cotton prices remained weak. The future price of New York cotton closed at 64.10 to 67.00 American cents per pound. The cotton ginning and oil mills sector is facing growing concerns following the federal budget's failure to eliminate sales tax on cotton and its by-products. Industry leaders fear that more ginning factories and oil mills may shut down, leading to a surge in undocumented trade. Business communities are urging Prime Minister Shehbaz Sharif to allocate the substantial annual funds of over Rs. 700 billion from the Benazir Income Support Program towards reviving struggling industries instead of charity. They argue that boosting businesses will strengthen the national economy. Ehsan ul Haq, Chairman of the Cotton Ginners Forum, revealed that despite recommendations from a committee formed on Prime Minister Shehbaz Sharif's directive—supporting textile mill owners' demands to either abolish the Export Facilitation Scheme (EFS) or implement it domestically—the budget retained sales tax on cotton, cottonseed, oilcake, and cottonseed oil. Additionally, no sales tax was imposed on imported cotton, further destabilizing the sector. Haq warned that over 800 already inactive ginning factories and 1,000 oil mills could be joined by more closures. He highlighted that Pakistan, once the world's fourth-largest cotton producer, has now fallen to seventh place due to excessive sales taxes (over 70%) on ginning and oil industries, non-implementation of crop zoning laws, and unchecked sugarcane cultivation. A significant portion of Pakistan's foreign exchange reserves is now spent on importing cotton, yarn, and edible oil. Instead of reviving distressed industries or reducing taxes, a major chunk of national resources (over Rs. 700 billion) is being diverted toward charity or misused under its guise. Haq appealed to PM Shehbaz Sharif to redirect these funds toward industrial revival to bolster the economy. Expectations were high that ginning factories in Punjab and Sindh would resume operations after Eid-ul-Adha holidays. However, due to the unchanged tax policies, only a limited number have restarted despite increased cotton arrivals in several cities. This has led to declining prices for cotton and Phutti, directly hurting farmers and weakening the economy. Experts also warn of a potential record rise in undocumented trade as a result. Abid Zaidi said that at present, only a few ginning factories are operational in Sindh and Punjab, ( number is increasing day by day )working at a slow pace due to limited arrivals at the start of the season. The growers, ginners and the textile industry had placed high hopes on the federal budget, anticipating supportive measures from the government. However, no tax relief was granted. As a result, market sentiment turned negative, and lint prices sharply declined by Rs. 1,000 per maund from Rs. 17,500 to Rs. 16,500 in a single day. Adding to this pressure, global cotton prices are also weak, further dampening the domestic market. The combination of high input costs and falling cotton prices has deeply disappointed growers, who were already facing hardship due to low wheat prices earlier in the year. Current government policies appear to favour imports, placing further strain on local farmers. Without a level playing field, the survival of growers, ginners, and even the textile industry is in serious jeopardy under the prevailing tax regime and the cotton demand is likely to drop about one million bales this year. Cotton sowing is already lagging significantly behind targets, and if the current tariff structure continues, farmers will be further discouraged from planting cotton. As a result, Pakistan's cotton production is expected to fall short of projections. In addition, rising temperatures and a growing whitefly infestation are likely to further damage the crop. Hardly 400 ginning factories are likely to be operational this season and the rest will take rest. We may have even lower production compared to last season. In its recent meeting, the Farmers Advisory Committee at the Central Cotton Research Institute (CCRI), Multan, issued detailed agronomic recommendations for cotton growers, effective through June 30. Cotton experts highlighted increasing pest pressures in cotton-growing regions, particularly from whitefly, jassid, thrips, and other insect pests. Growers were strongly advised to conduct regular pest scouting and apply pesticides only when pest populations reach economic threshold levels, and in consultation with cotton experts. Head Transfer of Technology CCRI Multan Sajid Mahmood said for jassid control, when the population reaches one nymph or adult per leaf, farmers should apply Dinotefuron at 100 grams or Flonicamid at 60 grams per 100 litres of water per acre. These insecticides are also effective against aphids. In the case of thrips, where 8–10 nymphs or adults per leaf are observed, Spinetoram at 60 ml or a mixture of Abamectin + Thiamethoxam at 500 ml per 100 litres of water per acre is recommended—particularly if mite infestation is also present. Experts recommended delaying the initial pesticide application as long as possible. For whitefly management, the use of at least 10 yellow sticky traps per acre is advised. If the population exceeds five nymphs or adults per leaf, chemical control using Flonicamid (80 grams), a mixture of Centrinili Prol + Dinotefuran (300 ml), or Pyriproxyfen (400–500 ml) per 100 litres of water per acre should be adopted. In fields where boll formation has commenced, pink bollworm infestation has been reported. Farmers should install one pheromone trap for monitoring and eight traps per acre for active management. For termite control, a combined application of Chlorpyrifos (1000 ml) and Fipronil (480 ml) through flood irrigation using a single nozzle is advised. For fields in the flowering or boll development stage, consistent and adequate irrigation is essential. Thinning should be completed within 25 days under moist soil conditions, and all weak or diseased plants should be removed. Effective weed management through timely irrigation and mechanical control—particularly in the first 60 days—is crucial, as unchecked weed growth can result in up to 40% yield loss. The use of high-tine cultivators (riggers) is recommended once the crop is six weeks old. Additionally, in glyphosate-tolerant varieties, glyphosate may be applied at 800–1000 ml per 100 litres of water per acre to manage weeds. For cotton sown in March–April for seed purposes, rouging—removal of unwanted, off-type, or diseased plants—should be completed before boll formation. In cases where fruit shedding symptoms are observed, a foliar spray of zinc sulphate (250 grams), borax (150 grams), and magnesium sulphate (300 grams) in 100 litres of water per acre is recommended. To enhance nutrient uptake, a separate solution of 2 kg of urea should be added to the spray mix, and the application repeated after 15 days. Furthermore, once the crop reaches 45 days of age, a post-irrigation application of one bag of urea along with 5–6 kg of zinc sulphate is recommended to support optimal growth and productivity. These guidelines have been developed by CCRI's cotton experts to help cotton growers safeguard crop health and maximize yields during the critical mid-season growth phase. Copyright Business Recorder, 2025
Business Recorder
19-06-2025
- Business
- Business Recorder
Pakistan's textile mill shuts down leasehold spinning unit amid sector challenges
Arctic Textile Mills Limited, formerly called Khurshid Spinning Mills, has announced the immediate discontinuation of operations at its leasehold spinning unit, citing adverse conditions in Pakistan's spinning sector. The listed company, which manufactures and deals in all types of yarn, disclosed the development in its notice to the Pakistan Stock Exchange (PSX) on Thursday. 'The Board of Directors, in its meeting held on June 19, 2025, has decided to discontinue the use of the leasehold spinning unit with immediate effect. 'This decision was taken in view of prevailing adverse conditions in the spinning sector across Pakistan, characterised by declining demand, increased input costs, and persistent market uncertainty. The operations of the leased spinning unit have become commercially non-viable,' read the statement. The Pakistani textile sector plays a crucial role in the country's economy, contributing significantly to exports and overall GDP. However, the sector is currently facing challenges, including issues with the Export Facilitation Scheme (EFS) and high energy costs. Last week, the government, in its federal budget, imposed an 18% sales tax on imported cotton yarn. Hailing the decision, the All Pakistan Textile Mills Association (APTMA) strongly urged the government to extend the 18% sales tax to all yarns and fabrics, whether cotton or polyester, imported under EFS. Meanwhile, the board of Arctic Textile Mills informed that there will be no material financial impact on the financial position of the company due to the discontinuation of this spinning unit.
Business Recorder
18-06-2025
- Business
- Business Recorder
Sustainable path to $100 billion textile exports
The Government of Pakistan appreciates the proactive engagement of textile sector associations in highlighting the challenges faced by the value-added textile export industry. The sector's role in employment generation, foreign exchange earnings, and industrial development is well-recognised, and it remains a central pillar of the government's export strategy. Recent concerns, particularly regarding the Export Facilitation Scheme (EFS), sales tax on cotton yarn, liquidity constraints, and market access barriers, have been raised vocally in national media. The government believes it is important to address these openly and constructively to foster a more sustainable and competitive textile export ecosystem. Breaking the thread: is EFS the reckoning spinning deserves? It has been argued that changes to the EFS have had an adverse effect on small and medium-sized enterprises (SMEs), leading to a loss of competitive edge, and there are calls for the restoration of the original scheme. It is crucial to recognise and safeguard Pakistan's unique advantage in locally produced cotton yarn However, the government's policy decisions regarding the EFS and the sales tax on cotton yarn are aimed at correcting long-standing market distortions and promoting equitable local value addition. The imposition of 18% sales tax on imported cotton yarn is a step towards leveling the playing field. Previously, imported inputs for export under EFS enjoyed a 0% sales tax, while domestic materials for the same purpose were subject to 18%. This created a significant disadvantage for local spinning and weaving sectors, encouraging reliance on imports even when local capacity existed. This measure is intended to foster local manufacturing and strengthen backward linkages across the entire textile value chain, from cotton growers to garment manufacturers. It is crucial to recognise and safeguard Pakistan's unique advantage in locally produced cotton yarn. This local supply chain serves as the lifeblood for countless small and cottage-scale manufacturers. Unlike larger entities, these vital players often cannot 'dream' of importing yarn from other countries, relying heavily on the immediate and accessible supply of even small quantities (e.g., 4 bags) of local cotton or cotton/poly blends to run their knitting machines. This segment is a significant employer and contributor to the value-added sector, and their ability to readily procure raw materials locally is a competitive edge that must be protected and amplified. The government believes these changes, over time, will strengthen the entire domestic ecosystem, benefiting all segments. Concerns regarding the potential misuse of the EFS scheme by certain entities, particularly regarding the import of fine count yarns (60s, 80s, 100s) by some giants, are legitimate. The government is committed to ensuring transparency and accountability. Any reported irregularities in the utilisation of imported raw materials and their correlation with export products will be thoroughly investigated to prevent exploitation of the scheme and ensure that its benefits are genuinely directed towards enhancing value-added exports. Over-reliance on the EU and US markets makes Pakistan's exports vulnerable to external shocks On the taxation front, there is emphasis on reinstating the exporters' final tax regime, stating its withdrawal has increased compliance costs and financial stress, particularly for SMEs. The government is committed to a transparent and equitable tax system. While acknowledging concerns about compliance costs, the move away from the final tax regime is part of a broader strategy to broaden the tax base, enhance revenue mobilisation, and ensure fair contributions across all sectors of the economy. Simplification of procedures to minimise administrative burdens remains a continuous priority for the Federal Board of Revenue (FBR), and the focus is on streamlining processes rather than a return to regimes that may have inadvertently narrowed the tax base. Monitoring industrial production: NA panel rejects FBR's budget proposal Liquidity for exporters is a valid concern, especially regarding delays in rebates under sales tax, customs duties, DLTL, and DDT. The government is actively working to implement automated, time-bound mechanisms for refunds. Substantial progress has already been made in digitisation, but exporters must also play their part in ensuring timely and accurate documentation to support this shift. Internationally, the 29% US tariff on Pakistani garments has rightly been flagged as a limiting factor. However, a broader view reveals that Pakistan's average tariff burden in the US is still lower than that of many competitors, including Vietnam, Bangladesh, Cambodia, and China. Trade negotiations remain ongoing, and the government continues its diplomatic efforts to expand market access, including with the US. Pakistan, US move closer to securing trade deal as tariff talks continue At the same time, Pakistan has already reaped substantial benefits from the EU's GSP+ status, with exports to the bloc doubling since 2014, reaching €8 billion in 2023. But over-reliance on the EU and US markets makes Pakistan's exports vulnerable to external shocks. The global market is shifting rapidly to man-made fibers (MMFs), which now account for over 70% of global fiber consumption The government encourages the industry to actively explore newer markets—East Asia, Africa, and emerging economies—just as competitors like Bangladesh have done with great success. Pakistan eyes East African market with new sea trade corridors Calls have been made for a national branding and marketing campaign for 'Made in Pakistan' garments. The government fully supports this, but such campaigns must be co-owned by the private sector, which has the insights, networks, and incentive to drive global brand building. The Ministry of Commerce welcomes partnerships on this front—through trade show participation, joint marketing funds, and digital campaigns. Warnings about the closure of export units, rising unemployment, and foreign exchange losses are serious. Yet, these are precisely the outcomes the government seeks to prevent—not through short-term relief—but through structural reforms that build long-term competitiveness. These reforms must be seen in the context of a broader industrial modernisation agenda. To reach the $100 billion export target, Pakistan's textile industry must break out of its over-reliance on cotton. The global market is shifting rapidly to man-made fibers (MMFs), which now account for over 70% of global fiber consumption. Pakistan lags far behind—with just 11% MMF share. Bangladesh, by contrast, has diversified aggressively into MMF-based apparel. Future growth lies in embracing these trends, and the government is committed to supporting this shift, including in technical textiles. Furthermore, associations must also turn inward and propose strategies for domestic production of dyes, chemicals, polyester yarn, and accessories. These inputs form a large chunk of Pakistan's textile import bill and are critical for backward integration. Reducing import dependency not only saves foreign exchange but strengthens resilience. Fiscal constraints are real, and every sector must contribute fairly to the national exchequer. Support for export industries remains a priority—but must be consistent with long-term fiscal sustainability and reform. On a final note, I wish to draw attention to an ambitious initiative by the Government of Punjab: the establishment of a fully compliant Garment City on 250 acres at the Quaid-e-Azam Business Park in Sheikhupura. This industrial estate is designed specifically to empower SMEs with modern infrastructure and compliance standards. The government invites the textile industry to partner with it in making this a showcase for Asia. Let us work together to strengthen Pakistan's textile value chain—through smart policy, shared responsibility, and forward-looking strategy. The $100 billion export dream is achievable, but only if we move decisively beyond short-term fixes and toward long-term transformation. The article does not necessarily reflect the opinion of Business Recorder or its owners
Business Recorder
18-06-2025
- Business
- Business Recorder
Export-oriented sectors on the brink, PRGMEA tells PM
LAHORE: Pakistan's $11 billion value-added export-oriented industry —contributing nearly one-third of the country's total exports — has issued a strong SOS appeal to Prime Minister Shehbaz Sharif, warning that recent budgetary measures are set to derail the export-oriented sectors at a critical time. In a joint statement, Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), in collaboration with the top export-oriented associations including PHMA, SIMAP, PSGMEA, PGMEA, PLGMEA, PCSUMEA and Sialkot Chamber of Commerce, demanded the immediate revival of the Final Tax Regime (FTR) and restoration of the Export Facilitation Scheme (EFS) to its original structure. The appeal was endorsed by industry stalwarts including PRGMEA Chairman Dr Muhammad Ayyaz Uddin and former Central Chairman Sohail A Sheikh, Sialkot Chamber of Commerce and Industry (SCCI) President Ikram ul Haq, PSGMEA Chairman Khawaja Masud Akhtar — whose company's footballs are used in FIFA World Cup tournaments — SIMAP Chairman Zeeshan Tariq, PLGMEA Chairman Syed Ahtisham Mazhar, PHMA Chairman Abdul Hameed and former chairman Khawaja Mushraf, PGMEA Chairman Annas Raheel Barlas, PCSUMEA Chairman Muhammad Jamal Bhutta, Majid Bhutta, Ansar Aziz Puri, Sheikh Luqman Amin and other prominent exporters and business leaders. They expressed deep concern that despite government slogan of 'export-led growth,' the reality on the ground is entirely opposite. The Government always talks about promoting exports, but in practice, no department seems to be on board. They pointed out that in the entire budget speech, the finance minister uttered the word 'export' only once — and that too in a negative context while imposing duties on imported yarn under EFS. Addressing the Prime Minister directly, the joint statement said: 'Honourable Prime Minister, we urge you to intervene immediately. Please convene an emergent meeting with the leading export associations and the Sialkot Chamber before this budget is passed. If this situation persists, Pakistan's most reliable foreign exchange earning sector will suffer irreparable damage.' They stressed that in such a policy environment, the government's vision 'URAAN PAKISTAN' of taking exports to $100 billion is simply not possible. The industry leaders were clear: 'We're not asking subsidies, exemptions, or special treatment—just a level playing field to compete globally. Unfortunately, the current policies have drastically raised the cost of doing business and severely impacted ease of doing business. Work must begin on a war footing to restore confidence and streamline processes. International buyers are actively seeking long-term clarity and stability in the EFS framework, as Pakistan stands at a strategic moment to attract business being diverted from China. This opportunity must not be missed. They said the abolition of FTR and the breakdown of EFS have created chaos in the industry. The Final Tax Regime, which once offered a simple and predictable tax mechanism, has now been replaced by complex procedures, audits, and refund hurdles, particularly hurting small and medium (SMEs) exporters. Meanwhile, the EFS—once a vital mechanism for importing essential raw materials not produced locally, or required by buyers to use their nominated suppliers to meet international quality standards, such as specialized materials and technical fabrics — has been bogged down by unnecessary conditions, limiting access to critical inputs and undermining export competitiveness. Business leaders emphasize that it is time for Pakistan to strategically move beyond cotton and adopt a more diversified, innovation-driven approach to value-added apparel exports. Copyright Business Recorder, 2025
