LAHORE: The All Pakistan Textile Mills Association (APTMA) and Pakistan Hosiery Manufacturers and Exporters Association (PHMA) have locked horns over the duty-free import of cotton yarn.
The PHMA has demanded the government abolish customs and regulatory duties on import of cotton yarn, claiming that the basic raw material was unavailable for apparel and home textile sectors in local markets which may lead to a decline in textile exports.
Former PHMA chairman Shahzad Azam told Profit that the spinning sector was allowed to import cotton free of duty, but the apparel and home textile sector were not allowed the same, which, according to him, was a discriminatory practice.
When asked about the reason why government should allow duty-free import of cotton yarn when it could damage the local spinning industry which already produces the material with more than 13.4 million spindles in use, Azam replied, “Why should we buy expensive cotton yarn from them when we can import it at cheaper rates?”
The former PHMA chairman alleged that spinning millers have formed a cartel and were blackmailing them by selling cotton yarn at higher rates.
“It is our right to import the material at duty-free prices just like spinning mills are allowed to import duty-free cotton,” he added, reiterating that the government must concede to their demand if it wished to control a decline in exports.
‘NO SHORTAGE’
Meanwhile, APTMA Punjab Chairman Abdul Rahim Nasir told this scribe that there was no shortage of cotton yarn in the country.
“In fact, the import of cotton yarn during the first quarter of FY20 was 11,047 tonnes, while it rose to 13,976 tonnes in Q1FY21, showing an increase of 27pc,” Nasir shared.
In addition, he maintained, yarn exports have also reduced significantly, signifying an enhanced supply to further processing and value addition in the country.
Nasir said that the apparent ‘shortage’ being touted was based on commercial considerations that have affected the price of yarn worldwide; exporters have booked orders at an exchange rate of Rs168-170 to a US dollar while the current exchange rate was Rs161.5, leading to a hike in the cost of pre-booked export orders.
He added that similarly, cotton which was being traded at 63.8 cents/lb just three months ago was currently at 76 cents/lb, increasing the cost of yarn proportionately.
The APTMA official stated that the notion that Pakistani exports would miss Christmas orders due to a “shortage of yarn” was false as manufacturing and shipping procedures require at least 3 to 4 months, a timeframe which has long passed.
“The real issue is rooted in incorrect export pricing and misplaced expectations on the exchange rate,” he said.
It may be noted here that duty-free import of yarn for re-export after further processing has always been readily available to registered exporters through Duty and Tax Remission for Exports (DTRE).
“APTMA has and always will support the import and simplification of procedures for duty-free raw materials or other inputs for export purposes,” Nasir said.
Further, he said that the argument that a reduction in taxes would increase supply or reduce costs for exporters was illogical, as exporters were already entitled to the duty-free import of yarn through DTRE or bond.
APTMA emphasises that any blanket approval for import of duty-free cotton yarn would lead to dumping of the material and would also result in the facility’s misuse.
“This will result in the closure of many of units and the stopping in the track of many expansions and new projects which are planned or are underway, thereby hampering the progress made by the economy in recent months owing to export-led growth,” the APTMA Punjab chairman said.
He said that the government must take yarn exporters’ concerns into account and note the real values of yarn’s import and export to prevent misinformation and rectify the root cause of the problem. “A shortage certainly does not seem to be the problem here,” he added.
Speaking to Profit, Naveed Gulzar, a leading spinning miller from Faisalabad, corroborated APTMA’s statement, saying that cotton yarn is available in abundance and the allegation of cartelisation amongst spinning millers is baseless because cartels are only formed when there are 4 to 5 players in the market.
“How one could have a cartel amongst 400 textile mills,” Gulzar asked.
The leading spinning miller said that the price of cotton yarn has increased due to an increase in the prices of raw materials needed for its production rather than a shortage.
He maintained that yarn and especially poly cotton yarn is available with everyone. “However, if there is such a thing going on then it could be because of hoarding by Sutar Mandi brokers,” Gulzar added.
