Export-oriented sectors likely to get Rs 75 billion package

Prime Minister Nawaz Sharif is likely to announce an incentive package for five or six export-oriented sectors to the tune of Rs 65 -75 billion of which textile sector would be the top beneficiary, a senior government official told Business Recorder. “Homework on the package has been finalised by the confidantes of the Prime Minister and it is now lying with the Finance Minister Ishaq Dar, likely to be announced in the first or second week of December,” he added.

Earlier, Commerce Minister Engineer Khurram Dastgir Khan who is also looking after the parliamentary affairs of the Ministry of Textile Industry had announced that a package of Rs 170 billion is awaiting the Prime Minister’s approval. Chairman Board of Investment (BoI) Dr Miftah Ismail has also tried to take credit for formulating the package. Insiders claim that Prime Minister Nawaz Sharif and Finance Minister Ishaq Dar were unhappy at the premature announcements and claims by the two top government functionaries which led to shelving of the package. Another reason was the looming political threat of PTI’s November 2 sit which led to the delay in the announcement of the package.

“We feel that fiscal space is available with the government so at least five or sex sectors should be given incentives to enable these sectors to compete with their counterparts in other regional countries in the international market,” he maintained.

In reply to a question, the official said that average rebate of five per cent would be made available to the select exporters. Answering another question, he said that incentives of Rs 170-185 billion would have considerable impact on fiscal deficit which the government cannot afford. One per cent fiscal deficit is equal to Rs 300 billion. The government is already bearing a loss of Rs 30-35 billion in GST per quarter due to zero rating.

The government is expected to announce 3 percent rebate to yarn/ grey fabric, 4 percent to processed fabrics, 6 percent for home textile/knitwear and 8 percent for garments sector. The sources added that the proposed rebate for raw and semi-raw exports would be around 4 per cent and value added sectors 8 percent, respectively. The committee has also proposed the removal of Regulatory Duty (RD) on key export-oriented industrial inputs including raw material and bring down custom duties to zero. Removal of import duty and sales tax on industrial machinery is also on the cards.

Another official well versed with WTO rules said that the incentives package for export oriented sectors is a clear violation of WTO rules. “Pakistan should shift from textile to other sectors as micro fibre has replaced textile, which Pakistan does not have,” he added.

Last year, total exports were $20.8 billion – down from around $25 billion in 2013-14. One of the key reasons for the decline was crashing commodities prices, the Ministry maintains, though Bangladesh’s exports increased from $31 billion to $34 billion during this period.

All Pakistan Textile Mills Association (APTMA) and other textile sector are anxiously waiting for the package and using different channels to compel the governmennt make an early announcement Unconfirmed reports suggest that the package would be tabled before the federal cabinet for a formal nod as the Supreme Court’s judgement has made it mandatory for the government to seek cabinet approval for all decisions which have financial implications.