ISLAMABAD: In view of the threat to the local cotton yarn industry due to the rising import of cotton yarn, the Federal Board of Revenue (FBR) has withdrawn SRO 15(1) 2010, slapping 5 percent custom duty on the import of cotton yarn.
The Economic Coordination Committee of the Cabinet was informed that cotton yarn import rose to 9.2 million bales during July-February 2013-14 compared to the same period of last fiscal year. The import of cotton increased to 20,097,295 kg in the current fiscal year as compared to 10,120,808 kg a year ago, reflecting an increase of 117 percent.
It is to be noted that a summary was moved by the Textile Industry to the ECC and SRO 15(1) 2010 was issued by the FBR to exempt cotton yarn imports from custom duty of 5 percent, on the recommendation of the Ministry of Textile Industry, and approved by the Cabinet Committee on Textiles chaired by the then minister for finance Shaukat Tarin.
The recommendation was made in 2009-10 to ease yarn demand-supply situation for domestic downstream industry since the price of cotton and its downstream products had skyrocketed in the international market resulting in increased exports of cotton yarn from Pakistan. The decision was taken as a short-term measure to provide relief to the downstream industry by reducing the cost of importation to zero and also applying quotas on the export of yarn from the country.
The demand-supply situation returned to normal after a few months after the arrival of the new cotton crop in 2010-11. The regulatory duty and quota regime on yarn exports were abolished. However, SRO-15 on the duty elimination was not withdrawn. The applied MFN rate on cotton yarn hence remained at 0 percent in Pakistan whereas the MFN rates in India and China are 10 percent and 5 percent, respectively. According to recent data, import of cotton yarn increased rapidly and the cotton yarn industry of Pakistan has started feeling the heat of this extraordinary liberal tariff regime. Further, the import data reveals that the increase is mainly from India which is providing huge subsidies in the form of drawbacks, interest rate subsidies, and infrastructures schemes to their cotton yarn industry. The ministry recommended that SRO 15(1)/2010 may be withdrawn and customs duty of 5 percent that was prevalent earlier be restored.
