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Cut in polyester

duty and drawback

raise agreed

SHAHID IQBAL

KARACHI: The government has agreed to arrest the fall in the export of synthetic textiles by reducing the import duty to 30 percent on polyester yarn and enhance the duty drawback to 20 percent. The decision is likely to be announced in the next budget, Business Recorder reliably learnt.

The government has accepted the proposal of Export Promotion Bureau for enhancing the duty drawback and reducing the import duty on polyester yarn. A highly placed government official said that the EPB had submitted the proposal in view of the decline of synthetic textile export by 30 percent in the last 10 months.

When the government is chasing an export target of 9.2 billion US dollars, its traditional export has started falling because of defects in the export policies. The export of art and synthetic textiles has already registered a decline of 73 million dollars to 575 million dollars in 1994-95 from 648 million dollars in 1993-94.

"The declining trend will not allow us to collect more than 450 million dollars", said the official. He said that the decline was also discussed in a recent meeting in Islamabad where the Prime Minister herself examined the various adverse factors.

A number of steps have been agreed in principle to be adopted in the next budget to support the exports in different items.

"In order to arrest the declining trend in the export of synthetic textile items, the government had announced a package of incentives, but in spite of these measures the exports have not picked up," said a working paper prepared by EPB. The bureau was of the view that the import duty on polyester yarn should be reduced at least by 30 percent. The current position is that one kg of polyester yarn costs Rs 90 which makes it uncompetitive in the international market.

"Last year the duty drawback rates on synthetic textiles were halved without any proper calculations. Subsequently, there has been a devaluation and an increase in import duties but there has been no revision in the drawback rates. The industry has become uncompetitive," the working paper noted.

"Along with high import duty, rising inflation and high labour charges have posed a threat to many export items. Even the traditional items like cotton-based products and leather products might suffer if the cost of production is not reduced in the country," said a high official of EPB while analysing the over-all trend in exports.

The officials said that the duty drawback on export of polyester fabrics was expected to be increased to about 20 percent. The duty drawback is currently 10 percent, it was 20.7 percent in 1994-95.

"If the import duty on polyester is reduced, the local manufacturers will also reduce their monopolistic prices. Alternatively, the duty drawback on synthetic fabrics should be enhanced. This is also affecting the export competitiveness of garments made by synthetic fabrics," said a high official of EPB.