Non-payment of duty drawback irks value-added textile sector (Pakistan)

Exporters of the value-added textile sector in Pakistan have stated that they would approach the court of law if the drawback of local taxes and levies (DLTL) claims worth billions of rupees were not released by the Government.

Rana Muhammad Mushtaq Khan, Chairman and Muhammad Jawed Bilwani, Chief Co-ordinator of the Value Added Textile Forum, representing at least 14 value-added textile associations, have said that the textile exporters are experiencing severe liquidity crisis, and a delay in the release of the DLTL claims has pushed a number of export-oriented units to the brink of closure.

The exporters claimed that it is for the first time in the country’s history that the Government came out with such an excellent textile policy, which proposed to sanction PKR 17 billion for DLTL for 2009-10 fiscal and PKR 27 billion for the 2010-11 fiscal.

In keeping with the textile policy, the Ministry of Finance had previously apportioned a sum of PKR 10 billion for the initiative. Of this, a sum of PKR 5 billion was released for the initial three months of the current fiscal year to the State Bank of Pakistan (SBP), as part of the quarterly refund of DLTL claims and past R&D claims.

Of the total claims worth PKR 28.72 billion presented by the exporters before the SBP, claims only worth PKR 5.3 billion have been released, while rest of the claims worth PKR 23.42 billion are still outstanding, the value-added textile exporters said.

They added that Mr. Shaukat Tarin, the former Finance Minister and Rana Muhammad Farooq Saeed Khan, Ex-Minister for Textile Industry, had given assurance on several occasions that the DLTL Scheme would not be withdrawn before the expiry of the Textile Policy 2009-2014.

However, these promises have not been kept and this has belied the trust of the exporters. Also, it has made it impossible for the exporters, who are struggling to attain the export target of US$ 25 billion, to withstand competition in the world market. The textile export target of US$ 25 billion has been fixed by the Ministry of Textiles and is to be achieved by 2014.

In addition to factors like not consulting the stakeholders, abrupt changes in the Government set-up and the appointment of new Federal Textile Minister and Federal Textile Secretary, have also hurt the industry.

The exporters said that following the introduction of the textile policy, the exports have grown immensely over the past two years and the Government can easily regain the trust of the textile industry through timely disbursal of the drawback duty.

They highlighted that though textile exports are ranked as fourth biggest export item in India, Government there has sanctioned a US$ 438 million subsidy for the sector under a Scheme for Upgradation of Textile Export Sector. As against this, Pakistan, which has textiles as its main export item, has completely overlooked the sector, they added.

They further said, “The Value-added Textile Forum strongly believes that in order to fulfil the objectives of the textile policy, the immediate release of the outstanding DLTL claims is very essential. Also, an extension of three years should be granted to the drawback on local taxes and levies so as to aid survival of the exporters and to boost exports to attain the impressive target of attaining US$ 25 billion in exports by 2014.”