ECC withdraws customs duty on cotton yarn imports

The Economic Coordination Committee (ECC) of the cabinet on Wednesday withdrew customs duty on import of cotton yarns and waived 66 percent take-or-pay commitment in power purchase and gas supply agreements for three public sector RLNG-based plants.

The decisions were taken during a meeting presided over by the Minister for Finance, Revenue, Industries and Production Hammad Azhar. The committee approved the withdrawal of customs duty to ensure smooth supply of cotton and cotton yarns to the value-added industry, while bridging the gap between domestic production and overall demand for the inputs.

The customs duty will remain zero till June, and is subject to “the approval of the cabinet,” Adviser to Prime Minister for Commerce and Investment Razak Dawood said in a tweet.

Dawood said the Economic Coordination Committee of the cabinet withdrew customs duty on import of cotton yarns to facilitate the value-added exporters on a summary moved by the ministry of commerce.

The government in December last already waived five percent regulatory duty.

Wary of downbeat cotton outlook amid significant decline in the crop output, textile businesses again started to see a glimpse of hope to build international competitiveness considering an exchange rate- driven erosion of margins.

“Only the half is done,” said Jawed Bilwani, chairman of Pakistan Apparel Forum that also demands imposition of duties on cotton yarn exports.

“We want the same level of duties on yarn exports as were on yarn imports,” he added.

Although yarn prices are seen declining, textile exporters still term it exorbitantly high. Pakistan is grappling with a challenge to reverse falling cotton production that was estimated to fall 40 percent.

With drop in output, textile business houses catch fear of price spike and they believe could be controlled to get hold of export orders diverted from countries under coronavirus lockdown.

The government is yet to facilitate imports via land routes from Uzbekistan and India that are more cost-effective.

Power division presented a summary regarding waiver of minimum 66 percent take-or-pay commitment in power purchase agreement and gas supply agreement of three RLNG-based public sector power plants namely Quaid-e-Azam Thermal Power Plant, Balloki Power Plant and Haveli Bahadur Shah Power Plant. These amendments would envisage submission of a monthly production plan (MPP) as a binding on the power purchaser and the power seller wherein the power purchaser will be entitled to submit demand requirement as needed, at least 75 days before the start of each such month, which will be finalized by the system operator and operating committee. The concept of a monthly delivery plan for deliveries of gas has been paired with the monthly schedule. The MPP will come into effect from the year 2022.

After seeking input from relevant stakeholders, the committee approved the summary and appreciated the concept of monthly production plan as a cost-effective solution, enabling the power and gas purchasers to make requisite purchases in line with actual requirements instead of following a fixed arrangement.

Power division also presented another summary proposing amendment to the facilitation agreement and amendment to the government guarantee agreement with Kot Addu Power Plant. It included the proposal that the project may be withdrawn from the Privatization Commission and entrusted to Private Power and Infrastructure Board. after due deliberation, the committee approved the summary, in principle, subject to formal vetting by the law division.

The ECC also approved a technical supplementary grant for finance division amounting to Rs11.7 billion as the share of the federal government for the establishment of 4 mother and child hospitals in Punjab.