ISLAMABAD: Com-merce Ministry said on Thursday that summary on import of cotton from India is under process.
This was disclosed at a meeting of National Assembly Standing Committee on Commerce, presided over by Syed Naveed Qamar.
Ministry of Commerce also came under fire for giving a subsidy “unfairly” to All Pakistan Textile Mills Association (APTMA) which is allegedly involved in billions of rupees fake invoices scam, “which will be unveiled in the next six months”. The Ministry said that it is reviewing the subsidy mechanism so that it should be linked to performance.
Kunwar Usman, Director General, Textile (Commerce Ministry) informed the committee that there has been a continuous decline of cotton production since FY 2015-16. As per Cotton Crop Assessment Committee (CCAC), estimated domestic cotton production would be 7.7 million bales in the current fiscal year, while Pakistan Cotton Ginners Association (PCGA) and United States Department of Agriculture (USDA) have been projecting 5.6 and 5.7 million bales, respectively.
In 2006-07, total cotton production was 13 million bales which has declined to 7.7 million bales in 2020-21.
He further stated that due to less cotton production, domestic production of cotton yarn has remained low which resulted in yarn shortage and subsequently high yarn import orders, adding that value-added sector is not able to buy the yarn it needs domestically to materialize export orders.
He said electricity is available to export oriented industry at cents 9 per unit (all inclusive) and RLNG is at $ 6.5 per MMBTU, adding that the industry is benefitting from these “incentives”. The committee was informed that prices have increased due to shortage of cotton production.
The Chairman Standing Committee inquired whether Pakistan will be competitive when India and Bangladesh will be back in business after the Covid-19 is over. Secretary Commerce replied that both India and Bangladesh are now back in the market but Pakistan has to ensure its presence in those markets where it made inroads during the Covid-19, adding that the key challenge is competitiveness of cost, including energy prices. He said availability of cotton beyond June and July is also one of the key challenges facing the sector and acknowledged that there is an issue in orders after June.
Naveed Qamar suggested that subsidy should be shifted to those sectors that require it rather than those that are getting it now.
Secretary Commerce responded that there are arguments and counter arguments to this observation. The argument is that subsidy is being given to a basket of export-oriented sectors but the counter-argument is that the subsidy is not based on performance. Another argument is that the incentive of subsidy is not only going to export-oriented industry but also sub-sectors, which are part of the value chain.
“We are conducting a comprehensive analysis of subsidy issue. The analysis will be shared with the committee,” said the Commerce Secretary.
The Secretary Commerce said share of export of those Pakistani goods have been hit in the global market whose average cost was higher viz-a-viz international prices. Another factor is efficiency and labour productivity. However, productivity and predictability of those sectors which have orders should be ensured, otherwise they would be deprived of orders. For this, prices of energy, etc., need to be “stabilised”.
Khurram Shahzad, treasury member, raised questions on the performance of sectors that are being subsidised. He said 80 percent subsidy is being given to spinners (APTMA) who are also enjoying status of export-oriented industry, adding that they are merely importers.
“They import cotton, etc., and sell it in local market,” he said, challenging the figures. He said FBR has statistics for 75-80 percent sales on which GST was paid whereas 20 -25 percent was sold in “black” and on which sales tax was not paid.
“A big issue of fake invoices of trillions of rupees will emerge in six months. One sector, i.e., APTMA, is being given benefits of billions on GST claims on fake invoices and at the same time also getting subsidy,” he maintained, adding that no doubt APTMA is a very “powerful lobby” as compared to value-added sector but they are not exporters.
He suggested that APTMA’s local sales should be included in SRO 327 and made accountable.
Khurram Shahzad said Pakistan’s exports increased from August but it was not due to Commerce Ministry, adding that 60 per cent increase in exports share was due to the trade war between China and United States. He said the performance of exports will decline from April 2021.
Khurram Shahzad criticised the Commerce Advisor for not “resolving” his industry’s issue which is paying 17 per cent GST which is returned after three for four months.
“We import cotton and polyester under the SRO 327 and pay all taxes and duties. The government should include local sales in SRO 327,” he maintained.
At this, Secretary Commerce stated that there is a viewpoint that subsidy should only be performance-based while presently it is across the board.
The committee was apprised that the summary for import of cotton from India through land route in June is ready. Value-added sector wants opening of border with India whereas APTMA is opposing the proposal.
Special Secretary Commerce, Dr Suhail Rajput, said the import of cotton from across the border (India) will be a political decision but it is under consideration.
The DG Cotton said Pakistan can benefit from importing cheap raw material from India.
Syed Naveed Qamar was of the view that cotton should be imported “from where it is cheap,” adding that the import of expensive cotton will have a trickled-down effect on the value chain.
Khurram Shahzad accused the Commerce Advisor of imposing “high” duty on import of chemicals which his industry and two more factories manufacture.
Rana Iradat Hussain asked why Commerce Ministry did not raise the issue of cotton import when the government took the decision to ban trade with India.
Mian Shafiq suggested that PCGA should also be invited to the next meeting to find out “how much of their amounts are stuck with APTMA,” adding that all have “vested interests”.
The committee also discussed insurance claims of PPL and other entities outstanding with NICL.
The Committee constituted a sub-committee to look into the issues related to subsidy, cotton production and cotton import.
Besides others, the meeting was attended by MNAs Ali Khan Jadoon, Wajiha Akram, Sajida Begum, Usman Ibrahim, Tahira Aurangzeb and Shaza Fatima Khawaja.