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Wednesday, June 19, 2024

APTMA demands regionally competitive energy tariff and zero rating

Central Chairman All Pakistan Textile Mills Association (APTMA) Mr Asif Inam has demanded reduction in power tariff to 9 cents/kWh, bringing down interest rate to 12 percent and restoration of zero rating for the textile industry to enable the industry to contribute to the national economy through exports, investment and employment.

He was addressing a press conference at the APTMA Lahore office on Tuesday. Chairman APTMA North Mr Kamran Arshad, Senior Vice Chairman Mr Asad Shafi, and Secretary General North Mr Mohammad Raza Baqir were also present on the occasion.

 Mr Inam said the industry was paying Rs240 billion in cross subsidies and over Rs150 billion in stranded cost. He said supply of electricity at 9 cents/kWh would generate over 300 megawatts in additional grid demand and Rs500 billion in revenue.

The central Chairman also questioned the justification for the interest rate at 22% when inflation has reduced to 11.8% in the country. He said the government can save Rs3 trillion in the interest payments by cutting down the interest rate.

On the demand of zero rating, he asked why the government was holding on to a Rs300 billion float of industrial sales tax refund. He proposed the government to collect sales tax at retail stage with a potential of over Rs250 billion.

Speaking on the occasion, Chairman APTMA North Mr Kamran Arshad said it is imperative to restore zero rating regime on all manufacturing stages of the entire value added textile chain and levying sales tax only on sale of end product fit for consumption by the consumer to arrest the incessant decline in production and export of textile products and to ameliorate the existing gloomy situation. He said APTMA fully endorses levy of sales tax on local consumption of textile products without disturbing exports which is only possible through shifting of mode of collection from the primary and intermediary stages of manufacture to the end product. It will not only revive the economy but also tremendously upsurge tax collection from the textile sector and boost exports as exporters would be relieved from the mounting liquidity crunch. It will also bring an end to the rampant malpractices including fake/flying invoices and tax frauds.

On the demand of reduction in markup, Mr Arshad said overall inflation is projected to remain between 13-15 percent in the next year due to falling global commodity prices, sustained domestic demand destruction, and relatively modest currency depreciation. The State Bank of Pakistan (SBP) should maintain positive real interest rates to ensure the persistence of declining inflation and aid in achieving SBP’s medium-term target of 5-7 percent inflation by September 2025, with single-digit inflation becoming a tangible possibility, he added.

Senior Vice Chairman Mr Asad Shafi said the export sector had enjoyed regionally competitive energy tariffs (RCET) of 9 cents/kWh in 2021-22, leading to record growth in textiles and apparel exports by 54%, from $12.5 billion in FY20 to $19.3 billion in FY22. However, power tariffs for export-oriented firms rose to approximately 17.5 cents/kWh (Rs46/kWh) today. Production is financially unfeasible at these power tariffs, which are more than twice the average faced by competing firms in regional economies such as Bangladesh (8.6 cents/kWh), India (average of 10.3 cents/kWh; 6 cents/kWh for textile and apparel firms in Maharashtra), and Vietnam (7.2 cents/kWh), he stressed.

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