Spinners, garment manufacturers strongly discord over duty on yarn imports

The Pakistan spinners and garments manufacturers both having strong line of reasoning to support their positions over the duty on yarn imports the ministry is left to find a solution somewhere in the middle to protect the interests of both.

Aptma’s recent demand for withdrawal of the duty exemption on India’s yarn to restrict its imports after New Delhi announced the 4pc rebate on its exports after the EU grant Pakistan GSP+ status. Former Aptma-Punjab chairman Shahzad Ali Khan said that the rebate on its yarn exports means that India will become much cheaper than them.

As, India’s textile industry is already enjoying several incentives in the form of low energy prices, almost free credit, export rebates, etc that have allowed it to ‘dump’ its textile products in their market at the expense of domestic industry. Therefore, it is crucial to restrict the influx of its textiles in Pakistan market through withdrawal of the import duty exemption to protect their investment and jobs.

While the garment exporters have strongly decided to oppose the demand of spinners to re-impose a 5pc duty on yarn imports from India when the commerce ministry takes a decision on it at a meeting of the stakeholders on Tuesday (today).

The demand is completely opposed to the free market principle that Aptma claims it stands for. If they have to benefit from the GSP+ and raise exports to Europe, the government will have to reject this demand, said Prgmea Chief Coordinator Ijaz Khokhar.

The small garment exporters are already hit hard by sudden appreciation of the rupee and imposition of the duty on Indian yarn will only push domestic prices at the cost of the value-added exports. As they have booked orders for the rest of 2014 at Rs108 a dollar. Now the greenback is being traded below Rs100. The imposition of the duty on Indian yarn will only increase their costs, putting most of them to an uncompetitive level, hence they shall do anything to oppose this move.

Aptma still stood for free market mechanism in textile trade. But the Indian move to support its spinning industry has made the playing field uneven for them. They have always competed against India despite huge, hidden subsidies it gives to its industry.

But this move has eroded their comparative edge and will result in losses that can lead to closure of many mills. In which case garments industry will not be able to survive alone if local spinning industry is closed down.

But Ijaz strongly disagrees to this fact. It is wrong to say that India will be able to flood Pakistan with its yarn if its import is not restricted through imposition of duty. The imposition of duty will only cause domestic yarn prices to shoot up, substantially raising their production cost. In such situation GSP+ concessions is of no benefit if they don’t have value-added textiles to export.