Synopsis Indian exporters experienced a mixed 2024, with higher online orders and demand for sustainable products but lower order values. Exports rose 5-8%, driven by the US and EU, despite slow demand in some European nations. Global brands shifted orders from Bangladesh to India due to political instability there, boosting garment exports. Rising Israel-Iran tensions posed logistical challenges. Higher online orders, demand for sustainable products and order values that were lower than the past were among the key trends for Indian exporters in the year that is coming to a close. Exporters termed 2024 as a mixed year amid US elections and slow demand in some European countries, especially France and Germany, even as they expect the start of the holiday season in the Western markets to boost shipments.
Source: Economic Times
Synopsis India and Australia concluded a three-day meeting to expedite their Comprehensive Economic Cooperation Agreement (CECA). Negotiators discussed market access, aligning with India's food security goals, and explored collaborations in agriculture, supply chains, and other key areas. Building upon the interim ECTA, the CECA aims to broaden trade across goods, services, and emerging sectors. India and Australia have “outlined a path forward for the early conclusion” of their Comprehensive Economic Cooperation Agreement (CECA), the government said Monday. The two sides discussed critical areas of the proposed agreement, including trade in goods, services, mobility, agritech cooperation, among others during a three-day stocktake meeting held from December 4-6.
Source: Economic Times
The Indian rupee weakened to a record low on Tuesday, pressured by heightened expectations of domestic rate cuts next year after the government named career civil servant Sanjay Malhotra as the next governor of the Reserve Bank of India (RBI). The rupee hit a low of 84.80 in early trading, surpassing its previous all-time low of 84.7575 hit last week. The RBI likely stepped in to support the rupee, with traders pointing to dollar sales by state-run banks. Malhotra, currently serving as the revenue secretary to the finance ministry, has been appointed as the RBI governor for a three-year term starting Dec. 11. A likely shift towards accommodative monetary policy is among the potential changes that could occur under the new governor, Nomura said in a note. A rate cut at the RBI's February monetary policy committee meeting is "now likely cemented", Nomura said.
Source: Business Standard
India had negotiated for six years to be a part of RCEP but in 2019 backed off from signing the agreement as it would have been in effect a free trade agreement with China. Despite the calls from some quarters including the Niti Aayog for a reconsideration of India’s decision not to join the China-backed Regional Economic Partnership (RCEP), the government on Friday said it is firm on staying out of the 15-nation trade bloc. “During the 3rd RCEP Leaders Summit held in November 2019 in Bangkok, India conveyed its position that the current structure of RCEP did not reflect the RCEP Guiding Principles or address the outstanding issues and concerns of India. There has been no change in India’s position since then,” commerce and industry minister Piyush Goyal said in a reply to a question in Rajya Sabha in September the World Bank in its India Development Update has also recommended reconsidering joining RCEP, citing potential boosts in trade, investment, and GDP growth. Earlier this month Chief Executive Officer of government economic think tank Niti Aayog B V R Subrahmanyam said India should be a part of RCEP and CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership. India had negotiated for six years to be a part of RCEP but in 2019 backed off from signing the agreement as it would have been in effect a free trade agreement with China. India-China bilateral trade of $ 118 billion is already skewed heavily in favour of China and the deficit with the northern neighbour is $ 85 billion. RCEP includes 10 ASEAN group members (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam) and their six FTA partners – China, Japan, South Korea, Australia and New Zealand. Barring China India has FTAs with almost all the other members of RCEP. With New Zealand FTA is being explored while with Australia negotiations for a Comprehensive Economic Cooperation Agreement (CECA) are in advanced stages. The Economic Cooperation and Trade Agreement with Australia is already operational. Post the signing of RCEP China has walked away with all the gains vis-a-vis other partners of the group. ASEAN’s trade deficit with China has jumped from $ 135.6 billion in 2023 from $ 81.7 billion in 2020. Also, the trade deficit of major ASEAN countries Singapore, Thailand, Vietnam, Philippines has steadily increased. Japan’s trade deficit with China has increased to $ 41.3 billion in 2023 from $22.5 billion in 2020. South Korea may face a trade deficit for the first time with China this year. India was never part of the CPTTP negotiations which is a trade agreement between 12 countries including Japan, Malaysia, Vietnam, Australia, Singapore, Brunei, New Zealand, Canada, Mexico, Peru, and Chile. The US, which was also part of the negotiations under President Barack Obama, withdrew in 2017 on the very first day in office of Donald Trump.
Source: Financial Express
MP Sanjeev Arora has questioned the government on its efforts to diversify export markets for textiles in light of changing global trade dynamics and increased competition from countries – including Bangladesh and Vietnam The textile exports from Punjab has recorded a 30% plunge in three years, Union minister of state for textiles Pabitra Margherita informed Rajya Sabha (RS), triggering MP Sanjeev Arora from Ludhiana to flag the concern on Monday. The Rajya Sabha MP sought clarity on the steps being taken to arrest the fall. MP Sanjeev Arora emphasised the need to innovate and align with international standards to regain Punjab’s standing in global markets. As Punjab’s textile exports continue their downward trajectory, industry stakeholders are calling for stronger policy interventions and state-level strategies to reverse the decline as the issue has become a critical concern for a sector that is vital to the state’s economy and livelihoods, he observed. Presenting provisional data, Margherita revealed that Punjab’s textile exports (including apparel and handicrafts) have dropped sharply over the last three years. Exports amounted to 2,111.5 million USD in FY 2021-22 but plunged to 1,502.2 million USD in FY 2022-23 and further to 1,500.4 million USD in FY 2023-24, indicating a decline of nearly 30% over three years. Arora expressed concern over the sustained reduction, pointing out the potential implications for Punjab’s economy, particularly its employment and manufacturing sectors. He questioned the government on its efforts to diversify export markets for textiles in light of changing global trade dynamics and increased competition from countries – including Bangladesh and Vietnam. The MP also underscored the importance of investing in advanced textile technology and workforce skill development to rejuvenate the industry. He emphasised the need to innovate and align with international standards to regain Punjab’s standing in global markets. In response, the minister outlined ongoing initiatives aimed at boosting the textile sector. “Skilling programmes under the Samarth Scheme, a part of the National Skill Qualification Framework, have benefitted approximately 800 individuals in Punjab since April 2021. Export incentives like the Rebate of State and Central Taxes and Levies (RoSCTL) and Remission of Duties and Taxes on Exported Products (RoDTEP) are being implemented to enhance competitiveness. Infrastructure projects, including the PM Mega Integrated Textile Regions and Apparel (PM MITRA) Parks Scheme and Production Linked Incentive (PLI) Scheme, aim to promote large-scale manufacturing,” the minister stated.
Source: Hindustan Times
According to PIB, India’s textile sector is a vital component of its economy, contributing about 2.3% to GDP and employing 45 million people directly. The market is projected to grow from $240.8 billion in 2024 to $475.7 billion by 2033, driven by robust domestic demand and exports. Today, the Bangladesh Garment Group, or Beximco Group, is apparently trying to sell 32 garment manufacturing enterprises. This has prompted speculation that big international fashion brands may divert their orders to India. Moreover, the Beximco Group has 169 firms and is apparently trying to sell 32 organizations designated as Category B, which are mostly involved in textiles and clothes. According to local media, the purpose of these auctions is to pay off debts owed to Janata Bank and IFIC Bank. Additionally, Bangladesh is a vital player in the global garment trade, with large clients including Walmart and H&M; nevertheless, the segment is experiencing increased instability in its textile industry, sparking concern that major international fashion companies could shift their orders to India.
Here are the textile stocks in focus after international fashion brands may divert their orders to India;
Gokaldas Exports Ltd
With a market capitalization of Rs 7,539.71 crore, the shares were trading at Rs 1,059.10 per share, increasing around 2.12 percent as compared to the previous closing price.
Welspun Living Ltd
With a market capitalization of Rs 16,833.13 crore, the shares were trading at Rs 174.95 per share, increasing around 0.72 percent as compared to the previous closing price.
Himatsingka Seide Ltd
With a market capitalization of Rs 2,728.61 crore, the shares were trading at Rs 216.90 per share, increasing around 3 percent as compared to the previous closing price.
Trident Ltd
With a market capitalization of Rs 20,164.70 crore, the shares were trading at Rs 39.67 per share, increasing around 4.37 percent as compared to the previous closing price.
Nitin Spinners Limited
With a market capitalization of Rs 2,708.96 crore, the shares were trading at Rs 481.85 per share, increasing around 0.67 percent as compared to the previous closing price.
Source: Trade Brain
The proposed Goods and Service Tax (GST) hike on Kashmir’s traditional hand-crafted textiles to 28% from the existing 12% has caused fear among the artisans in the valley. he proposed Goods and Service Tax (GST) hike on Kashmir’s traditional hand-crafted textiles to 28% from the existing 12% has caused fear among the artisans in the valley.
Kashmiri weavers are worried about the Centre’s move as it would badly hit the centuries-old handicraft industry of the valley. The GST hike has been recommended by the Group of Ministers on Rate Rationalisation that was chaired by Bihar’s Deputy Chief Minister Samrat Chaudhary. The hike will apply to the textile products, including Kashmiri shawls and crewel items priced above Rs. 10,000. The hike proposal is slated to be discussed in the GST Council meeting on 21 December. The ruling National Conference (NC) has expressed concern over the proposed increase in GST on traditional Kashmiri products, saying the move has raised alarm within the textile and apparel industry in Kashmir.
Calling on the government of India to reconsider its GST strategy to safeguard the industry and the livelihood it sustains, NC’s chief spokesperson and MLA Tanvir Sadiq emphasised that these products serve as the backbone of Kashmir’s economy and cultural heritage.
“The increase in GST rates will place a heavy burden on local artisans and traders, jeopardizing their livelihood and reducing the attractiveness of Kashmiri products in the global market. It is alarming to propose higher taxes during a period of economic instability characterized by inflation and stagnant growth,” he said.
Tanvir criticised the proposed hike, stating that it reflects a lack of understanding of Kashmir’s economic realities. He emphasised the importance of balancing revenue needs with social equity for the workforce, warning of severe consequences if this balance is not maintained. He urged the government to reconsider the hike in order to protect the interests of the Kashmir handicrafts industry. J&K Apni Party chief, Altaf Bukhari also warned that the proposed GST hike up to 28% on textiles, if implemented, would severely affect the livelihood of poor artisans, especially those who weave shawls, crewel, and other traditional textiles in the Kashmir Valley. “I strongly urge the Union Government not to accept or implement the proposed GST hike in the larger interests of the artisans”, he added. Meanwhile, the Kashmir Chamber of Commerce and Industry (KCCI) has flagged to Prime Minister Narendra Modi, Lt.Governor Manoj Sinha and Chief Minister Omar Abdullah the disastrous effect the hike will cause. Over 2.50 lakh artisans, many of whom are women and members of marginalised population, are directly or indirectly employed in the textile and handicrafts industry, which is a vital part of the region’s economic and cultural identity. The KCCI has asked the government to lower the existing GST rate to 5% in view of the current economic crisis in the valley.
Source: The States Man
Political instability forces international brands to shift orders from Bangladesh to Indian manufacturers. India's textile industry is thriving under unique circumstances, particularly as instability continues to grip Bangladesh. This situation is expected to lead to job growth and intensified international interest as brands shift their order placements to India. According to the Press Information Bureau (PIB), the textile sector is integral to India's economy, contributing approximately 2.3% to the country’s GDP and directly employing around 45 million people. There’s strong optimism about the market's future, with projections forecasting growth from $240.8 billion in 2024 to $475.7 billion by 2033. This optimistic outlook is prompted largely by strong domestic demand and increased export opportunities. Meanwhile, the Bangladesh Garment Group, also known as the Beximco Group, is reportedly attempting to sell off 32 of its garment manufacturing enterprises. This strategy is largely driven by financial constraints tied to debts owed to Janata Bank and IFIC Bank. The Beximco Group, which oversees 169 companies, has seen operational difficulties amid Bangladesh’s declining textile sector, raising concerns among international brands reliant on Bangladeshi manufacturing. Existing tensions within Bangladesh's political framework have prompted many renowned global brands not only to reconsider their partnerships but also to divert their orders toward India. High-profile retailers such as Walmart and H&M are reevaluated as risk factors within Bangladesh due to the economic instability and civil unrest. With so much uncertainty, brands are increasingly exploring alternatives where production can occur with reduced risk. Industry insiders note significant inquiries flowing toward Indian manufacturers from major international retailers. Ashish Gujarati, former president of the South Gujarat Chamber of Commerce, revealed how Surat's garment sector is benefiting. He states, "The garment industry sector has recorded increased inquiries from large brands since the unrest began, which presents substantial growth opportunities." This has resulted in excitement within production hubs for clothing like ethnic wear, denim, and women’s wear. Further insight suggests the garment industry’s growth rate—which currently stands at about 12% annually—could leap to between 20-25% if the inquiries result in firm orders. With this potential uptick anticipated, other cities like Tamil Nadu, known for its textile manufacturing, are also poised to reap the benefits. Simultaneously, the garment sector’s looming disruptions are not only growing concerns for Bangladesh’s economy but also lead to potential job losses and economic instability. The garment industry is reported to contribute around 11% to Bangladesh's GDP and accounts for approximately 80% of its textile exports. If this sector continues to crumble, the consequences could lead Bangladesh toward economic ruin, mirroring the bankrupt situations faced by countries like Pakistan. This situation poses broader challenges for the market dynamics, illustrating how fluctuations and instabilities can play significant roles on the international stage. India's proactive positioning aims to capitalize on the moment, ensuring its textile industry remains competitive and appealing to foreign investors. Notably, Indian companies such as Gokaldas Exports Ltd. and Welspun Living Ltd. are already benefitting from heightened interest, with stock assessments indicating positive market performances amid these shifts. Gokaldas Exports has seen substantial stock price increases, reflecting confidence among investors, as it adapts to the changing demands within the textile industry. Similarly, industry experts caution for sustained growth, emphasizing the necessity for Indian manufacturers to maintain quality and efficiency to meet the standards expected by international brands. Effective communication with sourcing managers and establishing comprehensive supply chains will be foundational as brands begin to realign their global operations to redirect investments. All considered, with the garment industry undergoing significant restructuring, India stands on the verge of transforming from the challenges of neighboring instability to becoming the cradle of textile production. Through strategic adjustments and quantum leaps within operational frameworks, its textile sector is set to emerge as a heavyweight player on the global stage. Though political outcomes can sway market sentiments, India's current position allows it to be responsive to changes, with both government and industry leaders working to seize the moment. The long-term impacts could define not just the future of the textile industry but also how interconnected economies can rise or fall based on circumstances well beyond their borders. These developments reveal the granular dynamics of global sourcing and production, and how they hinge pivotally on the fabric of socio-economic conditions. For the millions reliant on India's textile industry, these changes bring hope and potential for new beginnings, signaling the industry's vitality even amid regional challenges.
Source: The Pinnacle Gazette
HANOI (ILO News) - The Viet Nam Textile and Garment Association (VITAS), with support from the International Labour Organization (ILO), has launched a working group dedicated to enhancing the sector's engagement in skills development within the textile and garment sector. Led by VITAS, this group includes 19 members, representing leading industry enterprises, education, and training providers such as universities and TVET institutions specialising in textiles and garments, and a sector trade union representative. The initiative aims to foster partnerships between enterprises and education/training providers, reducing skill mismatches while improving the relevance and quality of skills supply to meet the industry's development needs. The group’s initial work plan was developed collaboratively with tripartite partners: representatives of the Government, workers and employers. Nguyen Chi Truong, Director of the Skills Department at the Directorate of Vocational Education and Training (DVET), Ministry of Labour, Invalids and Social Affairs (MOLISA), applauded the launch of the initiative. He believes that the established model will foster more active industry engagement in skills development and TVET, thereby enhancing the impact of skills investment on business performance.
The establishment of the working group is supported by the ILO’s “Future of Work in Textile and Clothing: Forecasting and developing skills to advance decent work and productivity in the sector” project,” funded by the Governments of the Netherlands and Japan. This effort aims to implement the recommendations from the skills needs assessment paper and sectoral skills strategy developed by the ILO and VITAS in collaboration with tripartite partners during 2023-24.
By addressing skills mismatches and fostering collaboration, the working group seeks to support the textile and garment sector’s ongoing development. While there is still much work ahead, this initiative represents a step toward aligning skills with industry needs and promoting more sustainable practices within the sector.
Source: International Labour Organisation
In the wake of three factory fires in Morocco caused by unsafe practices, Industry ALL Global Union and its local affiliate, Syndicat National de Textile Habillements et Cuirs (SNTHC-CDT),are urging the country’s government to work with the International Accord for Health and Safety in the Textile and Garment Industry. The unions would like to see Morocco’s government to set up a worker safety program to prevent future incidents. In recent weeks, textile factory fires in Fez, Casablanca and Tangier led to the death of one worker and severe burns for others. The fires were caused by unsafe practices such as use of gas-fired boilers, putting a spotlight on inadequate safety conditions in the nation’s textile sector. Last month, SNTHC-CDT launched a campaign to address subpar working conditions and safety protocols, calling for stakeholders to come together to work out a strategy for solving the problem. On Nov. 29, the union met with Morocco’s Ministry of Labor, as well as secretary of state Hicham Sabri, to discuss improving safety for textile workers. “The meeting was positive as the ministry took note of SNTHC-CDT’s request to hold a national debate bringing together all stakeholders in the sector,” said SNTHC-CDT general secretary Ahmed Hassoun. “We also informed the minister about the Accord agreement and stressed the importance of its implementation in Morocco.”
As a result of the meeting, the Ministry of Labor organized a meeting with representatives of Accord, IndustriALL and SNTHC-CDT to further discuss the possibilities of implementing the nternational Accord for Health and Safety in the Textile and Garment Industry in Morocco. The delegation laid blame on employers who refuse to adhere to health and safety laws while also raising concerns about underground textile operations and the inhumane working conditions in their facilities. Representatives from the unions urged the Ministry of Labor to develop protocols for implementing effective safety and health measures in textile manufacturing facilities. “We are deeply saddened by the news of such frequent accidents in the sector in Morocco,” said IndustriALL general secretary Atle Høie. “We welcome the results of the meeting between the minister and the SNTHC-CDT, which is part of the union’s ongoing efforts and initiatives to address such a serious situation.” With the ongoing growth of Morocco’s textile industry (the country’s apparel market is estimated to be $2.63 billion in 2024 and projected to grow by 2.87 percent annually, according to Statista) Høie said the nation needs to act quickly to prevent another tragedy. “Time is not on our side. We need stronger actions,” he said. “An agreement to bring the International ACCORD to Morocco would be a big step in the right direction.”
Source: Yahoo.com
Despite the strong will and desire to transform the European fashion industry and adopt sustainable practices, significant barriers hinder many brands from making substantial changes, according to The Status of European Fashion Report 2024, recently released by the European Fashion Alliance (EFA) in Brussels. A significant lack of knowledge, financial resources and human capacity are pressing as brands face increasingly stringent environmental and social regulations, it said. The European fashion industry is at a pivotal moment where sustainability, technological innovation, and talent development must converge to secure its future, it noted.
The industry can transition into a more ethical, transparent and sustainable business model by embracing new regulations, adopting cutting-edge technologies and investing in training. Clear and standardised guidelines, as well as financial support and incentives to bridge the financial gap and investment in dedicated personnel to enable companies to adopt greener practices are needed. Industry-specific roadmaps that simplify compliance processes would help businesses align with sustainability goals more easily and avoid missteps, said the report. Additionally, collaboration among policymakers, industry leaders and educators is key to navigating these complex changes. The report is based on a survey conducted among 211 creative-driven industry representatives, supplemented by qualitative interviews with leading opinion leaders. There is widespread recognition of the negative public perception of the fashion industry, largely driven by concerns about ethics and sustainability, driven by profitable business models promoting rapid consumption at the expense of quality and value. Restoring trust in Europe’s textile industry has become a crucial endeavour now, the report noted. A large majority of companies is investing in sustainability practices driven by consumer demand, regulatory pressure and a general shift in corporate responsibility. However, while 88 per cent of surveyed organisations have invested in sustainability, over half still lack the tools or support needed for a full transition to sustainable practices. Though digital transformation is reshaping how European fashion operates, only a portion of the industry has fully adopted such tools, with many companies citing high costs and a lack of technical expertise as barriers, the report added.
Source: Fibre2fashion
KARACHI: The All Pakistan Textile Mills Association (APTMA), Southern Region, has sounded the alarm over the misuse of the Export Facilitation Scheme (EFS), warning of widespread closures and mass unemployment in the domestic textile industry. In a statement issued Monday, APTMA highlighted how the scheme, which exempts imported cotton and blended yarns from sales tax and duties, is being exploited. Instead of being used solely for export manufacturing, large volumes of these imported yarns are being sold in the domestic market. This has created an uneven playing field, pushing local yarn manufacturers into financial ruin and causing the closure of over 40% of spinning mills. "Unscrupulous elements are evading taxes under the guise of exports, leading to massive revenue losses for the government and crippling the domestic industry," APTMA said. The misuse has resulted in the loss of hundreds of thousands of jobs, further compounding the industry's woes. APTMA criticised the withdrawal of zero-rating on local supplies for export manufacturing under the Finance Act 2024, calling it counterproductive. "While intended to enhance revenue, it has instead triggered a decline in business activity, further squeezing government revenue collection," the statement noted. High energy costs and delayed tax refunds have added to the industry's burden. Domestic manufacturers face an 18% sales tax on supplies, which exporters increasingly bypass by purchasing tax-free imported inputs. Although refunds are promised, delays by the Federal Board of Revenue (FBR) impose a hefty opportunity cost of 20% per annum, APTMA added. The association also pointed to illegal dumping of duty-free yarn in local markets, making it impossible for domestic manufacturers to compete. This, combined with declining cotton production and skyrocketing energy prices, has left the spinning sector on the brink of collapse. "If immediate action isn't taken, this crisis will spill over to other sectors, including weaving and processing, dismantling Pakistan's once-thriving textile value chain," APTMA warned.
Source: Tribune
KARACHI: The Pakistan Textile Council (PTC) has called on the government to reverse its decision of gas disconnection to Captive Power Plants (CPPs), emphasizing that uninterrupted gas supply to CPPs is crucial for sustaining industrial growth, boosting exports and ensuring long-term economic stability. The government’s decision to halt natural gas supply to industries operating captive power plants starting February 1, 2025, as part of its commitments to the International Monetary Fund (IMF), has triggered widespread concern among the textile industry and they warn of severe impact on the country’s economy and exports, if the decision is implemented as per plan. PTC is a platform for the Pakistan textile and apparel sector and represents top textile companies in Pakistan, which are the most progressive textile and apparel manufacturers in Pakistan. Fawad Anwar, Chairman PTC, criticized the move, citing a host of adverse effects it would have on Pakistan’s economy. “This decision will shut down the majority of industries, as they lack alternative energy sources and ultimately result in massively reduced exports and exacerbate unemployment,” he added. He said that the government’s decision is totally illogical and would result in unrecoverable loss to the exports as well as economy. “Suspension of gas supply to industries for CPP will totally close down a number of the industry as many industries rely on captive power plants for their energy needs and it does not have alternative forms of energy,” he added. He warned that this decision would undermine the government’s efforts to boost exports and generate foreign exchange. With industries unable to compete in the global market, this move will lead to a significant decline in Pakistan’s exports. In addition, closure of industry due to no alternative source available will create massive unemployment resulting in social unrest throughout the country, he added. Fawad said that the power company does not have infrastructure to provide electricity for new or enhanced connections and asked some companies for a two-year period for connections with a cost of infrastructure which is in billions. He said that the private sector consumes gas only for their own power generation as gas in Pakistan is the most expensive gas in the region. Private sector ensures that gas is used in the most efficient manner and most of the companies’ efficiencies are close to 65 percent or more as they ensure most of the heat is captured through heat recovery systems, he added. Chainman PTC claimed that the industrial sector is subsidizing gas being provided to the fertilizer sector and domestic consumers. With suspension of gas to industries for CPP, the government will be required to pay subsidies from its own resources and result in a circular debt for Pakistan, he said. “We feel this is an illogical decision and should be reversed immediately to ensure uninterrupted supply of gas to all industries to ensure growth and exports,” he demanded. PTC argues that uninterrupted gas supply to captive power plants is essential for sustaining industrial growth, safeguarding exports, and maintaining social stability. A blanket disconnection of gas supply will cripple industries that are the backbone of Pakistan’s economy, it added.
Source: Business Recorder
KARACHI: The All Pakistan Textile Mills Association (APTMA) Southern Region has highlighted the severe losses and unemployment caused by the misuse of the export facilitation scheme (EFS), which exempts sales tax and duties on the import of cotton and blended yarns. According to Chairman of APTMA South Zone Naveed Ahmad, this misuse has led to a significant increase in yarn imports under the pretext of being used in the export of textile products. However, much of this yarn is being sold in the domestic market, resulting in losses for local yarn manufacturers and the closure of many industries. This, in turn, has led to the loss of jobs and livelihoods for hundreds of thousands of textile workers. “While we appreciate genuine exporters, unscrupulous elements are misusing this scheme to evade sales tax and customs duties, leading to the loss of millions of rupees in government revenues and crippling the domestic industry,” he stated. The APTMA has raised the issue at all levels of government, calling for an immediate review of the scheme to create a level playing field. Unfortunately, their pleas have been ignored, and the domestic industry continues to suffer. Ahmad noted that the withdrawal of zero-rating on local supplies for export manufacturing under the Finance Act 2024 was intended as a revenue-enhancing measure but has instead had the opposite effect, leading to a decline in business activity and reduced government revenue collection. The textile industry, particularly the spinning sector, is facing severe challenges due to high energy prices. Local manufacturers who previously supplied exporters are now rapidly shutting down, as exporters are purchasing duty-free and sales tax-free inputs from abroad rather than from domestically manufactured yarn, which is subject to an 18 per cent sales tax. While sales tax is refundable in principle, the Federal Board of Revenue (FBR) continues to delay refunds, incurring an opportunity cost of at least 20 per cent annually. Ahmad also highlighted that imports of yarn and other inputs under the EFS are increasingly flooding the domestic market illegally. This duty-, sales tax-free yarn is being sold at prices that local industries cannot compete with, primarily due to higher production costs exacerbated by flawed policymaking that has led to soaring energy prices and a decline in domestic cotton production. “Over 40 per cent of spinning mills have been forced to shut down,” he said. “If the government does not urgently address the destructive impact of withdrawing the sales tax exemption on local supplies for export manufacturing, other sectors such as weaving and processing will soon follow, leading to the deindustrialisation of the entire upstream textile industry.” Ahmad said that Pakistan, once home to a full textile and apparel value chain -- a rare asset in the global market -- has seen this vital sector deteriorate due to poor policies. “Apart from India and China, no other country possesses this capability. But it’s now better to speak of this in the past tense, as these sectors are now on life support.” He further stressed the critical need to increase exports and add value to domestic exports to meet Pakistan’s external liabilities, which exceed $100 billion over the next five years. Losing one of the most valuable links in the textile and apparel value chain would be devastating for the country’s economic future. The APTMA urgently calls on the government to strengthen checks and balances on firms misusing the EFS to protect the domestic industry. The association also advocates for implementing credible penalties for those facilitating fraudulent activities. A thorough reappraisal of all EFS holders should also be conducted to improve transparency and accountability, and EFS licences should be limited to firms that are genuinely engaged in manufacturing. Ahmad demanded the government immediately restore the EFS to its pre-Finance Act 2024 form, including the sales tax exemption/zero-rating on all local supplies used for export manufacturing.
Source: International News
The All Pakistan Textile Mills Association, Southern Region, has highlighted the tremendous losses and unemployment due to misuse of the Export Facilitation Scheme, which exempts cotton and blended yarns from sales tax and duties on imports. Due to this, there has been a marked increase in the import of yarn under the pretext of using it to export textile products. However, many of these yarns are being sold in the domestic market. As a result, the domestic yarn manufacturing industries are faced with losses and closures, which has caused the loss of hundreds of thousands of textile workers’ jobs and livelihoods. While we appreciate genuine exporters, unscrupulous elements are misusing this scheme to evade sales tax and customs duties, thus causing loss of Millions of Rupees of government revenues and also crippling the domestic industry. APTMA has raised this issue at all levels of government and called for an immediate review of the scheme to create a level playing field. Unfortunately, our pleas have remained without any tangible action, and the domestic industry continues to close down. The withdrawal of zero-rating on local supplies for export manufacturing under the Finance Act 2024 was posed as a revenue-enhancing measure; rather, it is having the opposite impact by forcing a decline in business activity and, thus, the government’s revenue collection. Coupled with high energy prices, the textile industry, especially the spinning sector, is facing insurmountable problems. Local manufacturers, who previously supplied to exporters, are now rapidly shutting down as exporters purchase duty-free and sales-tax-free inputs from abroad over domestically manufactured ones that are subject to an 18% sales tax. While the sales tax is, in principle, refundable, the FBR continues to delay sales tax refunds to exporters, which entails an opportunity cost of at least 20% per annum. Imports of yarn and other inputs imported under EFS are also increasingly and illegally flooding the domestic market to the detriment of the local industry. This yarn, imported duty-free and sales-tax-free, is being sold in the domestic market at rates that the domestic industry cannot compete with due to higher production costs, which in and of themselves are a result of callous policymaking that have caused energy prices to skyrocket, and domestic cotton production to plummet. Over 40% of spinning mills have been forced to shut down. Suppose the government does not immediately address the destructive impact of the withdrawal of the sales tax exemption on local supplies for export manufacturing on the domestic industry. In that case, it is only a matter of time before this spills over to other sectors, such as weaving and processing, and the entire upstream textile industry is deindustrialized. Pakistan once had a full textile and apparel value chain, a rare global asse. Apart from India and China, no other country has this capability. But it’s better to speak of this in the past tense because these sectors are now on life support thanks to blundersome policies. It needs no reminding that Pakistan’s external liabilities over the next five years are in excess of $100 bn. The country is in desperate need of increasing exports and adding domestic value to exports to meet its external obligations in a sustainable manner without taking on more expensive debt. At this time, we cannot afford to lose one of the most valuable links of the textile and apparel value chain. We urgently call on the government to strengthen checks and balances on firms misusing the EFS to protect Pakistan’s domestic industry and implement credible penalties for those facilitating and engaging in fraudulent activities. Moreover, a rigorous reappraisal of all EFS holders should be conducted for improved transparency and accountability. EFS licenses should be limited to only those firms engaged in manufacturing. Finally, we strongly urge the government to immediately restore EFS to its pre-Finance Act 2024 form, including the sales tax exemption/zero-rating on all local supplies used for export manufacturing.
Source: Trade Chronicle
