Three-year extension notified

ISLAMABAD: The Commerce Division has notified Prime Minister’s export package, extended for the next three years, to be implemented from July 1, 2018.

This was revealed by Commerce Secretary Younus Dagha, to this correspondent.

Providing details, Dagha said the Prime Minister’s package (announced in January 2017) of incentives of Rs 180 billion was for exporters of textile and non-textile items on shipments made from January 16, 2017 to June 30, 2018. The package was aimed at improving the competitiveness of the export sector which had been adversely affected due to high energy costs, exchange rate appreciation and high import tariffs on input.

The package was improved further by the ECC on October 6, 2017 by allowing 50 per cent of the incentives to all eligible sectors and the remaining 50 per cent to those exporters who enhance their exports by at least 10 per cent in financial year 2018 compared with financial year 2017. Besides, in order to encourage market diversification, 2 per cent incentive of Freight On Board (FOB) value was allowed for exports to the non-traditional market.

The Prime Minister’s package has vitally contributed towards the turnaround in exports in FY 2018 which had been continuously declining since 2014. During July-April 2017-18, the exports had registered an increase of 14 per cent as compared to corresponding period of the previous year. It had contributed additional $ 2.3 billion foreign exchange earnings from exports during this period. The additional gains are estimated to be around $ 2.7 billion by the end of June 30, 2018.

During recent months, though the exchange rate had been rationalised reducing one element of extra cost from the export sector, the other major factors viz, energy costs and high tariffs on raw materials and intermediate goods continue to affect the export competitiveness vis-à-vis regional competitors. Therefore, in order to maintain the growth momentum, the export package needs to be continued. However, the package in its present form, with only 10.4 per cent incentives for non-textile sector which contributes 40 per cent to the national export basket, does not facilitate the efforts of diversification of exports into non-traditional sectors.

The Commerce Division, had proposed that in order to improve competitiveness and incentivise investment in export-oriented production, the Drawback of Local Taxes and Levies (DLTL) may be extended, on the same terms and conditions, for the commercial and manufacturing exporters for five years and the zero rating of textile machinery imports and withdrawal of duty on manmade fibres other than polyester may be continued. Besides, in order to encourage more non-traditional sectors, electric fans, electrical appliances, electricity equipment and cables, transport equipment including motor bikes, spots bags, leather products e.g. leather wallets, auto-parts, stationery, furniture, pharmaceutical products, fresh fruits and vegetables, meat and meat preparations including poultry, juices, syrups may be included in the package.

According to Commerce Division, these components of the export package are estimated to provide competitiveness benefits of around Rs. 65 billion annually (including Rs. 41 billion in Drawback of Local Taxes and Levies) to the export sector.

The Commerce Division had proposed following options for the DLTL: (i) all the existing sectors and the new non-textile sectors may be allowed DLTL at the existing rate (estimated cost, Rs 79 billion; or (ii) the existing sectors excluding raw materials (such as yarn, fabrics, tanned leather, etc) and non-textile sectors may be allowed DLTL at the existing rate (estimated cost Rs 64 billion); or (iii) in case the fiscal space is restrictive, the existing and non-textile sectors may allowed DLTL at the reduced rate (estimated cost Rs 43 billion); or (iv) the existing sectors excluding home textiles/made-ups and raw materials (such as yarn, fabrics, tanned leather, etc) and non-textile sectors be allowed DLTL at the reduced rate (estimated cost Rs 27 billion).

The former government while approving the Prime Minister’s export package for three years, ie, 2018-21 for commercial and manufacturer exporters, all existing sectors and new non-traditional sectors at reduced rate as follows.