From metals and textiles to chemicals and energy, The Indian Express studied multiple cases where import restrictions – tariff and non-tariff – have led to market concentration and increased costs for downstream users across sectors.
After intense lobbying by Indian Steel Association (ISA), an industry body led by big steel companies, the Ministry of Commerce in December initiated a safeguard duty probe on the import of certain steel items. Protection for domestic steel producers has been in place at least since 2010, but calls for a sharp 25 per cent duty hike has triggered a pushback from MSMEs this time around — the Engineering Export Promotion Council (EEPC) told the government that domestic steel prices are much higher than imports. Despite concerns flagged internally over market concentration in India’s solar panel industry and its potential to inflate household electricity tariffs, the Ministry of New and Renewable Energy brought back its mandate to source modules from select domestic manufacturers starting April 2024, potentially raising the cost of solar generation and giving an upper hand to select players. Between 2021 and 2023, the government brought in quality control orders (QCOs) on polyester and viscose fibres, key inputs for synthetic textiles, effectively restricting imports. While the Confederation of Indian Textile Industry (CITI) continues to flag high domestic costs and supply shortages, big companies Grasim Industries and Reliance Industries benefit. A rise in QCOs, tariffs, and other trade barriers on key raw materials, that serve to protect the domestic industry from external competition, is turning counterproductive – strengthening monopolies at the expense of smaller players. Now, MSMEs are pushing back against such protectionist measures.
In a pre-Budget meeting with the Chief Economic Advisor and Finance Ministry officials, the Federation of Indian Micro and Small & Medium Enterprises (FISME) said the use of tariff and non-tariff barriers like QCOs on the import of critical raw materials such as steel, copper, aluminum, and polymers is creating an uncompetitive environment for Indian industries, particularly MSMEs. Six months back, in her Budget speech in July 2024, Finance Minister Nirmala Sitharaman had proposed a comprehensive review of customs duty rates “to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes”. The government may take steps to rationalise customs duty rates further in the Budget to be announced on Saturday. Not only bodies representing MSMEs, but there is also some pushback from within the government too. NITI Aayog Vice-Chairman Suman Bery cautioned against high tariffs and trade barriers at a press briefing in December, and said the government has to be “very careful” to not close off imports to the point where India starts “cultivating local monopolies”. “An economy frankly gains more from its imports than it gains from the exports because imports are what provide competition,” he said. The Indian Express studied multiple cases where import restrictions – tariff and non-tariff – have led to market concentration and increased costs for downstream users across sectors, from metals and textiles to chemicals and energy.
Textiles
Less than a month after an anti-dumping duty on VSF was removed by the Finance Ministry in August 2021, Grasim representatives pushed the Ministry of Commerce and Industry to regulate the import of VSF through quality norms. In April 2023, CBIC started implementing the QCO, allowing VSF imports into India from only those producers approved by the Bureau of Indian Standards (BIS). Notably, most of India’s VSF imports came from Indonesia, while no Indonesian producer has been certified by BIS till now. After the QCO came into effect, Grasim’s market share jumped from 90 per cent to 95 per cent, while downstream user associations appealed to the Textile Ministry to temporarily suspend the QCO. Currently, there is a QCO on polyester staple fibre (PSF) as well, which is also a man-made fibre like VSF. Compared to VSF, the PSF market is relatively more fragmented but still concentrated. As per documents from DGTR, Reliance Industries Limited (RIL) accounted for 57 per cent of domestic PSF production in 2017. The remaining market share belonged to Alok Industries Ltd, owned by RIL, Indo Rama Synthetics (India) Ltd, and The Bombay Dyeing & Mfg Co Ltd. Industry players claim that RIL continues to hold a market share of around 60 per cent. Downstream synthetic textile manufacturers have urged the government to revoke the QCOs on man-made fibres (MMF). “Indian domestic raw material prices are significantly higher than international prices. While competitors like Bangladesh, and Vietnam have free access to such raw materials, India has imposed QCO on MMF fibre/yarn which is acting as a Non-Tariff Barrier on the imports of such raw materials and thus affecting their free flow. It has resulted in a shortage of some specialized fibre/yarn varieties,” the Confederation of Indian Textile Industry (CITI) said in its latest pre-budget memorandum.
Source: Indian Express
Synopsis The government has drafted rules mandating the exclusive use of Indian Standard Time (IST) across official and commercial platforms to standardize timekeeping. IST will be the mandatory time reference for legal, administrative, commercial, and financial operations, with exceptions for specialized fields subject to approval. In a move to standardize timekeeping, the government has drafted comprehensive rules mandating the exclusive use of Indian Standard Time (IST) across all official and commercial platforms, with the Consumer Affairs Ministry seeking public feedback by February 14. The Legal Metrology (Indian Standard Time) Rules, 2024, aims to establish a legal framework for standardising timekeeping practices, mandating IST as the sole time reference for legal, administrative, commercial, and official documents. "IST shall be the mandatory time reference across all sectors, including Key provisions include, prohibition of time references other than IST for official and commercial purposes, mandatory display of IST in government offices and public institutions and requirement for time-synchronization systems to ensure reliability, availability, and cybersecurity The proposal comes as part of efforts to ensure precise timekeeping in critical national infrastructure, including telecommunications, banking, defence, and emerging technologies like 5G and artificial intelligence. "Precise time with nanosecond accuracy is essential for strategic and nonstrategic sectors," a senior government official told PTI. Exceptions will be allowed for specialised fields such as astronomy, navigation, and scientific research, subject to prior government approval. The Department of Consumer Affairs is collaborating with the National Physical Laboratory and Indian Space Research Organisation (ISRO) to develop a robust time generation and dissemination mechanism planned to ensure compliance across sectors. Public stakeholders have been invited to submit comments and suggestions on the draft rules by February 14.
Source: Economic Times
Synopsis India's exports increased by 5.57% to USD 59.93 billion during April-December due to strong demand in the US market, while imports grew by 1.91% in the same period. Experts predict continued growth in bilateral trade and potential opportunities due to the US-China trade conflict. Concerns remain over possible US tariffs on Indian goods. The country's exports rose by 5.57 per cent to USD 59.93 billion during April December this fiscal on account of healthy demand in the American market for domestic goods, according to government data. During December, the shipments increased by 8.49 per cent to USD 7 billion, the data showed. On the other hand, imports during the first nine months of 2024-25 grew by 1.91 per cent to USD 33.4 billion, while in December it was up by 9.88 per cent to USD 3.77 billion. According to experts, going by the trend, the total trade between the two countries will continue to grow in the coming months also. The bilateral trade during April-December 2024-25 stood at USD 93.4 billion, as against USD 94.6 billion between India and China. The experts added that the possible trade war between the US and China will give huge export potential for Indian exporters. The US is the largest trading partner of India from 2021-22. The US accounts for about 18 per cent of India's total goods exports and over 6 per cent in imports and about 11 per cent in bilateral trade. Some experts raised concerns that if the US would impose additional duties on certain Indian goods, as threatened by US President Donald Trump, it can impact trade. In December last year, Trump had said India charges "a lot" of tariffs, reiterating his intention to impose reciprocal tariffs in retaliation for what New Delhi will impose on the import of certain American products. "India should respond firmly and in equal measure," economic think tank Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said. In 2018, when the US taxed Indian steel and aluminium, India retaliated by raising tariffs on 29 US products, recovering equivalent revenue.
Source: Economic Times
Synopsis India Budget: Deloitte advises the government to extend PLI benefits to job-generating sectors like handicrafts and leather in the upcoming Budget. Successful PLI schemes in electronics and auto should be continued. To boost foreign investment and exports, the government should ease policy restrictions and finalize FTAs with several countries. This will help meet the $1 trillion export target by 2030. Union Budget: The government in its coming Budget must extend fiscal benefits under the PLI (production linked incentive) scheme to sectors such as handicrafts and leather that can create more jobs, Deloitte said on Sunday. It also suggested that the existing PLI schemes must continue in sectors that have seen success, such as electronics, auto and semiconductors. The government in 2021 announced PLI schemes for 14 sectors, including telecommunications, white goods, textiles, manufacturing of medical devices, automobiles, speciality steel, food products, high-efficiency solar PV modules, advanced chemistry cell battery, drones, and pharma, with an outlay of Rs 1.97 lakh crore. Deloitte further suggested that to improve global liquidity (once the Western central banks start easing their monetary policies), the government can raise the ceiling for investment size and remove location restrictions to attract more foreign investment. "Multi-brand retail and e-commerce are some sectors that may benefit from this," Rumki Majumdar, Economist, Deloitte India, said. Further, she said that one of the biggest challenges will be to revive merchandise exports that have contracted by 3 per cent in FY24.
Source: Economic Times
Synopsis The talks on the India-Oman Comprehensive Economic Partnership Agreement (CEPA) are expected to receive significant momentum during Commerce Minister Piyush Goyal's visit to Oman. Discussions will focus on enhancing trade and investment, reflecting the importance of their economic ties, with bilateral trade estimated over $8.94 billion in 2023-24. New Delhi: The talks on India-Oman Comprehensive Economic Partnership Agreement (CEPA) are likely to get “further impetus” during commerce and industry minister Piyush Goyal’s visit to Oman this week, the government said Sunday. Goyal will visit Oman from January 27 to 28 for the 11th Joint Commission Meeting with Qais bin Mohammed bin Moosa al-Yousef, minister of commerce, industry and investment promotion of Oman. “The talks on India-Oman CEPA, which are at an advanced stage, are likely to commercially significant, balanced, equitable, ambitious and mutually beneficial CEPA,” the commerce and industry ministry said in a statement During the visit, the two leaders are expected to hold wide ranging discussions on trade and investment and the global economic situation, it said. “This visit underscores the importance that India attaches to its trade and investment ties with Oman, one of our important trading partners in the Gulf Cooperation Council (GCC) with bilateral trade estimated at over $8.94 billion in 2023-24,” it said. On the sidelines, Goyal is also expected to meet Sultan bin Salim Al Habsi, minister of finance and chairperson of the ministerial committee for CEPA, and Ali bin Masoud Al Sunaidy, president, Public Authority for Special Economic Zones & Free Zones. He is also likely to meet representatives of Oman industry and the Indian community.
Source: Economic Times
A weaker rupee is often seen as a boost for Indian exports by making goods more competitive globally, but the reality is more complex, the apex exporters' body FIEO said on Friday. Federation of Indian Export Organisations (FIEO) President Ashwani Kumar also said the recent depreciation of the domestic currency against the US Dollar represents a complex economic scenario with mixed outcomes. "A weaker rupee is not a one-size-fits-all solution to boost exports. A strategic, multi-pronged approach is needed to address the root causes of depreciation while mitigating its adverse effects," he said. Explaining it further, he said, that if the rupee depreciates by 2 per cent and the currencies of key competitors decline by 3-5 per cent, Indian exporters lose competitiveness in global markets. "This relative disadvantage erodes any potential price advantage Indian goods might gain," Kumar added. The domestic currency has depreciated over 4 per cent last year. The rupee closed at 86.22 (provisional) against the US dollar on Friday, weighed down by a stronger American currency. Kumar added that the depreciation also results in a rise in input cost, exchange rate volatility, inflationary pressure, and external debt burden. Many Indian exporters depend on imported raw materials and components. A weaker rupee significantly raises these input costs, often nullifying the perceived benefits of depreciation. "Fluctuating exchange rates create uncertainty, making it difficult for exporters to price their products competitively and plan for the long term," he said adding that the depreciation inflates the cost of imported goods like oil and commodities, driving up production costs and fuelling domestic inflation and this reduces consumer purchasing power. He added that a weaker domestic currency increases the cost of servicing foreign currency-denominated external debt, creating additional pressure on businesses and the government. Exports contracted for the second month in a row by about one per cent year-on-year to USD 38.01 billion due to global uncertainties, while imports rose by about 5 per cent to USD 59.95 billion.
Source: Business Standard
Giriraj Singh, the Union Minister of Textiles, will officially launch the “Handloom Conclave-Manthan” on 28th January at the Dr. Ambedkar International Centre in New Delhi. The interactive workshop will bring together stakeholders from all sectors of the handloom industry to develop a growth strategy. The Ministry of Textiles said in a statement that the conference is intended to promote cooperation amongst handloom weavers, manufacturers, retailers, buyers, designers, and other important stakeholders. The event will examine how to improve weavers’ livelihoods and fortify the handloom sector as a major engine of economic growth for Viksit Bharat 2047, with an emphasis on the Prime Minister’s 5F vision of “Farm to Fibre to Factory to Fashion to Foreign,” it continued. The Handloom Awards Online module and the Handloom Weavers E-Pehchan Portal will also be launched during the event. The conclave is expected to attract 250 participants, including 21 panelists, 120 handloom beneficiaries, 35 officials from Weavers Service Centres and IIHTs, and 25 state government representatives, along with officials from various Textile Ministry departments.
Source: Apparel Resource
The prime minister has consistently used his Republic Day and Independence Day appearances as a canvas to celebrate India's textile diversity
On India’s 76th Republic Day, Prime Minister Narendra Modi once again transformed a national ceremonial occasion into a stunning visual narrative of India’s rich cultural heritage with his attire. The Prime Minister wore a red and yellow Bandhej ‘safa’ (turban), its vibrant hues complemented by its long, elegantly draping tail.
Source: Indian Express
FAISALABAD: Pattern Chief of Pakistan Textile Exporters Association (PTEA) Khurram Mukhtar expressed deep concerns over the increase in gas tariffs for captive power plants, calling it a direct blow to the export competitiveness of textile exporters. He stated that despite receiving a positive response from global buyers at the world’s largest textile exhibition, in Germany, exporters are troubled by political instability and non-competitive energy tariffs in Pakistan. Mukhtar criticized the new gas tariff of Rs3500 per MMBTU and the imposition of an 8% UFG (Unaccounted for Gas) charge on the textile sector, deeming it unfair since actual losses in the gas sector are less than 0.5%. He emphasized that high energy costs, including expensive electricity and gas, have significantly raised production costs, leaving Pakistan’s textile exports less competitive compared to regional countries. He also rejected the implementation of the proposed Grid Transition Levy, labeling it unjustified. Mukhtar highlighted the importance of the “Combined Heat and Power” process for the textile industry, criticizing its classification under captive power plants as unjust. He urged for transparent cost allocation, sector-specific policies, and energy reforms to support export growth, warning that failure to address these issues would hinder Pakistan’s economic independence.
Source: PK News
During discussions on trade and economic ties in Damascus recently, Syria and Turkiye agreed to reassess customs tariffs on certain products to facilitate smoother bilateral trade. Both sides also agreed to start talks to re-enact the free trade agreement (FTA) suspended in 2011, when the civil war started in Syria, the Turkish trade ministry said in a statement. Though media reported recently that customs tariffs on Turkish imports had been raised by 300-500 per cent, the ministry clarified that the newly implemented tariff system, effective as of January 11, was not exclusive to Turkish goods but applied equally across all borders and customs administrations. Turkiye has been the primary backer of the opposition forces that ousted dictator Bashar Assad last month and has since pledged to help Syria's reconstruction and economic revival. Syria-Turkiye volume stood at $2.3 billion in 2010, before the civil war broke out, according to the Turkish Statistical Institute. In 2012, the trade volume plummeted to $565 million. It increased over the years but never achieved pre-2011 levels. Turkiye exported goods worth over $1.95 billion to Syria last year. The discussions also identified key areas for cooperation, including trade in industrial and agricultural products, transit and bilateral transportation and contracting and construction services to revive the Syrian economy, media outlets in Turkiye reported citing the statement. Turkish firms, which had so far provided services only to certain regions of Syria, will now have opportunities to operate throughout the country and evaluate investment potential in coordination with the Syrian administration, the statement said.
Source: Fibre2fashion
The government makes decisions based on merit and investor proposals, not relationships, adviser to the Ministry on Textiles and Jute Sheikh Bashir Uddin said on Sunday. "Please use resources of the institutions, benefit yourselves and the country and thus contribute to the economy and employment generation," the adviser, who is also in-charge of the commerce ministry, told the investors, reports BSS. He was addressing a function marking the signing of an agreement between the Bangladesh Textiles Mills Corporation (BTMC) and the Western Engineering Private Limited as the chief guest at a city hotel. The agreement aims to operate the Kurigram Textile Mills under the arrangement. BTMC Chairman Brigadier General SM Zahid Hassan and Western Engineering (Pvt.) Ltd Managing Director Bashir Ahmed signed the agreement. The adviser said the Bangladesh Jute Mills Corporation (BJMC) and BTMC have about 45-50 establishments, which the government wants to hand over to entrepreneurs through Public-Private Partnerships (PPP) or lease agreements, according to a ministry press release. "Three mills have already been handed over to the entrepreneurs in the last six months while more are in the pipeline," he added. Extending thanks to Western Engineering (Pvt) Ltd for the proposed investment, he said, "BTMC and BJMC mills have completed construction of infrastructure and after some renovations, those can resume production soon and thus there will be an opportunity to make profit," He said those work would be conducted with honesty, integrity and in a speedy manner through an open tender process. "The Ministry of Textiles and Jute is looking for investors and the businessmen to seize this opportunity." Highlighting various facilities for investments, Secretary of Textiles and Jute Md. Abdur Rauf said people would be benefitted if suitable employment opportunities are ensured in Kurigram. He said that the ministry is working to re-open the closed mills. Western Engineering (Pvt.) Ltd. Managing Director Bashir Ahmed said that they want to increase employment generation in Kurigram and thus want to build pro-people and environment-friendly industries. Chairman of BTMC Brigadier General SM Zahid Hassan delivered the welcome address. Additional Secretaries of Textiles and Jute Ministry Subrata Sikder, Arifur Rahman Khan, ANM Moinul Islam, Director General of Department of Textiles Md. Shahidul Islam, former chairman of BTMC Brig Gen (Retd.) Md. Ziaul Haque, and BJMA Secretary Abdul Barik were present on the occasion.
Source: Financial Express
XINHUA – Industry insiders from the United States (US) and other countries have warned against additional US tariffs on textiles and apparels. Although there probably was a sense of relief that US President Donald Trump did not make a tariff announcement on inauguration day, anxiety remains because tariffs may still come, said President and Chief Executive of American Apparel and Footwear Association Stephen Lamar. Speaking at a panel discussion at Texworld NYC, the largest textile and apparel sourcing trade show on the East Coast, Lamar said, “The uncertainty is really adversely affecting a lot of people, because they want to make decisions and it’s hard to make decisions when you’re still not sure what is going to be happening coming forward.” Tariffs, if imposed, are literally a tax that is put into the supply chain and somebody has to pay for it, said Lamar. Ultimately, tariff ends up going back to the consumers, added Lamar, who saw tariff and regulation as two main cost drivers for the supply chain in 2025. Trump threatened to impose universal tariffs of 10 per cent to 20 per cent on all imported goods during his presidential campaign in 2024. Vice-President of supply chain and customs policy at the National Retail Federation Jonathan Gold shared the concern. Tariffs do raise costs because they are not paid by a foreign government, country or entity, but paid by US importers, he said. Those tariff increases are too big for the importers themselves to absorb, and they are going to have to pass on those costs, whether directly or indirectly, to the final consumers, Gold added. The memorandum titled America First Trade Policy issued by Trump is “certainly a warning to, frankly, allies and adversaries that this administration is contemplating a wide range of tariffs for a whole host of reasons”, said Vice-President for international trade at the Retail Industry Leaders Association Blake Harden. If Trump follows through his threat and imposes a 25-per-cent tariff on imports from Mexico and Canada, the impact would be more for the final customers, said President Carlos Couttolenc Lopez of Textiles La Libertad, a Mexican textile company participating in Texworld NYC.
Lopez told Xinhua that he would have to increase prices or the buyer will have to take care of the additional tariff, which will reflect on the final price of the garment. It will be hard for free trade among Mexico, the US and Canada if the US introduces tariffs, said Lopez, who is also director general of a textile cluster named iTEXCON. Lopez runs a three-generation business of around 160 employees, and the US takes around 40 per cent of his market share but with only a single-digit profit margin currently. “We are concerned, but we have to wait. We can’t do anything about it at the moment. If they implement the tariffs, we will have to work on how to solve the problem with our American customers,” Lopez said. People are concerned that the new US administration will impose additional tariffs on goods coming from other countries to the US market, said executive of the Vietnam National Textile and Garment Group Vuong Duc Anh. “The new president would have very careful consideration, because when (you) increase tariff rate, the US consumer would bear that cost,” Anh told Xinhua. If a new tariff comes, inflation may come back and this will put pressure on the Federal Reserve with regard to its plan to further cut interest rates, according to Anh. “I hope that isn’t going to happen. But if it happens, we have to accept it. So, we have to find a way to lower our production cost, and we have to find a way to share with our buyer,” added Anh.
Source: Borneo bulletin
Pakistan’s textile industry has long been a major contributor to exports, employment, and value addition. However, the withdrawal of zero-rating/sales tax exemption on local supplies for export manufacturing while imports remain duty-free and sales tax-free under the Export Facilitation Scheme (EFS) has created structural distortions that are eroding the competitiveness of domestic industry and leading to widespread closure of domestic spinning, with further downstream segments of the textile value chain soon to follow. No country, let alone one aspiring for industrial and export growth, affords such preferential treatment to imports at the cost of its domestic industries and livelihoods of its people. Already grappling with economic instability driven by structural distortions, the government must urgently address this issue and create a level playing field for its local manufacturers. The EFS anomaly incentivizes exporters to rely on imports, even when equivalent inputs are available locally, because doing so eliminates significant tax-related costs. Exporters using local inputs first must pay 18% sales tax, then face protracted delays in sales tax refunds, often waiting over six months. Even then, only 70 percent of the tax is refunded, with the remaining deferred for manual processing on which there hasn’t been any progress over the last 4-5 years. This results in a strong financial disincentive to purchase local supplies when the entire process can be avoided by importing the same under EFS. The disparity not only distorts the market but also disrupts the natural economic linkages that should bind domestic industries together. The cascading consequences of this policy are significant. The spinning and weaving sectors have witnessed a sharp decline in demand for their products. These industries are already grappling with high costs of production, especially driven by prohibitive energy pricing compared to regional competitors. The added burden of unfavourable tax policies has pushed many manufacturers to insolvency. 40% of spinning units have been forced to shut down. Weaving mills face similar challenges. The result is billions of dollars in sunk investments, declining industrial output, and the loss of hundreds of thousands of jobs. This also has severe implications for Pakistan’s cotton economy, which is deeply intertwined with the spinning industry as its primary consumer. Cotton farming injects USD 2–3 billion annually into the rural economy, serving as a lifeline for some of the most vulnerable communities, particularly in marginalized regions like southern Punjab and Balochistan. The collapse of the spinning sector would effectively decimate domestic demand for cotton, leaving farmers without a market to sell in. This decline would disproportionately impact rural households, many of which depend on cotton cultivation and related activities for their livelihoods. Women, who make up a significant share of the labour force in cotton-picking, would be among the hardest hit, further deepening rural poverty and exacerbating inequalities in already fragile environments. The broader ripple effects extend beyond individual farmers. Agricultural revival initiatives like corporate cotton cultivation are unlikely to succeed without a robust spinning sector to sustain demand. At the same time, the IMF’s prohibition on crop support pricing has left farmers without guaranteed profitability, making cotton cultivation less attractive compared to other cash crops. Compounding these challenges is the fact that Pakistan’s cotton—characterized by higher trash content, moisture issues, and smaller bale sizes—is not competitive in international markets. Its primary utility lies in local consumption, where it is blended with imported cotton, which makes the domestic spinning industry critical to sustaining the cotton economy. By prioritizing imports and neglecting the local value chain, Pakistan is not only jeopardizing its industrial base but also destabilizing its rural economy, further amplifying the socio-economic fallout of these flawed policies. In any industry, efficient allocation of resources depends on market dynamics rather than arbitrary policy barriers. The current system disrupts this natural order, diverting demand from local producers to foreign suppliers simply because the latter enjoy tax exemptions. This inefficiency increases the overall cost of production and undermines the competitiveness of the entire textile value chain. Over time, as local industries shrink, the economy loses out on the multiplier effects of domestic manufacturing—job creation, backward linkages, and the development of ancillary industries. The current policy environment is also incompatible with Pakistan’s broader economic objectives. Policymakers have repeatedly emphasized the importance of reducing reliance on imports, creating jobs, and improving the current account balance. However, the preferential treatment afforded to imports through EFS directly undermines these goals. For every unit of raw material or intermediate input imported under tax exemptions, the country sacrifices opportunities for domestic value addition, employment generation, and foreign exchange savings. In effect, the policy acts as a subsidy for foreign industries, allowing them to capture domestic markets at the expense of Pakistan’s industrial base. A sustainable solution requires creating a level playing field for domestic manufacturers vis a vis EFS imports. Ideally, the government should restore the EFS to its original framework as of June 2024, including the zero-rating/sales tax exemption on local supplies for export manufacturing and extend it beyond one-stage-back to the entire value chain. This version of the scheme is aligned with the interests of all domestic manufacturers, be it exporters or their backward linkages, and minimizes the disadvantages faced by local inputs as even the June 2024 version of EFS disadvantaged standalone players over vertically integrated ones. For instance, a vertically integrated manufacturer of garments can import duty-free cotton under EFS, produce the finished garment and export it while the same product, manufactured by standalone players across the value chain, would face sales tax and minimum turnover taxes at each stage of production thus increasing costs and making their product relatively uncompetitive. However, in any case, domestically produced inputs for exports must be provided a level playing field. Therefore, if zero-rating cannot be provided to these then all EFS imports must be subjected to an equivalent sales tax as their locally produced counterparts. Alongside this, inefficiencies in tax administration be addressed. The sales tax refund process needs to be expedited and fully digitized and automated to ensure that exporters receive their refunds promptly and in full. This would free working capital for businesses and significantly reduce the fallout of implementing sales tax on EFS imports. The streamlined system would not only support the textile sector in the current context but also contribute to improving the overall ease of doing business in Pakistan.
Source: B Recorder
The Pakistan Textile Council (PTC), which represents 30% of Pakistan’s Textile export earnings, expresses its grave concerns over the Economic Coordination Committee’s (ECC) recent decision to increase the gas tariff for Captive Power Plants (CPPs) from Rs 3000 per MMBtu to Rs 3500 per MMBtu. This 16.7% hike is a severe blow to the textile sector, which is already grappling with mounting production costs and intense global competition. The textile sector is the backbone of Pakistan’s exports, contributing 60% of total exports and directly and indirectly employing one worker. A direct increase in energy costs—specifically for CPPs, which provide a vital energy source for uninterrupted operations—will critically undermine the competitiveness of Pakistan’s textile exports in global markets.
This decision reflects a clear anti-export bias in the government’s policy framework, prioritising fiscal revenue over the sustainability and growth of export-driven industries. By imposing an additional burden on the textile industry, the government risks reversing the hard-earned gains in export growth and jeopardising its balance of payments position. With the highest energy costs, the highest cost of borrowing, the highest minimum wage, and the highest taxation, competing in international markets will become impossible for Pakistani textile and apparel exporters. Fawad Anwar, Chairman of the Pakistan Textile Council, commented: “The ECC’s decision to raise gas tariffs for Captive Power Plants is deeply disappointing and short-sighted. Energy costs account for a significant share of textile production expenses. Such an increase will render Pakistani textiles uncompetitive on the global stage when the country should be aggressively pursuing export-led growth to stabilise its economy. This move sends the wrong signal to the export sector, discouraging investment and threatening job security for millions of workers in the industry. We strongly urge the government to reconsider this decision and engage with stakeholders to devise policies that support, rather than hinder, export growth.” PTC emphasises that the textile industry is not just an economic pillar but a crucial source of employment and development for the country. Policies that disproportionately burden this sector are counterproductive to achieving national financial stability. PTC calls upon the government to adopt a balanced approach by withdrawing the gas tariff hike for CPPs, continuing RLNG supply with ring-fenced prices, rationalizing UFG, no cross-subsidies and developing a coherent long-term industrial energy policy (power – petroleum – gas) considering global competitiveness factors.
Source: Trade chronicle
