The Pakistan Jute Mills Association (PJMA) has asked the government to allow 25 percent price preference to the local jute industry as the same was allowed to the engineering industry.
PJMA Vice Chairman Muhammad Jamil Hussain stated this in a letter to Commerce Minister Humayun Akhtar Khan.
He said, "If this facility is not possible, then a 25 percent regulatory duty be imposed on the import of jute-based goods as it will provide immediate protection to the domestic jute industry."
As decided by the Economic Co-ordination Committee (ECC) of the Cabinet, the duty would be fixed at 75 percent (25 percent+50 percent), the total duty of 50 percent after imposition of 25 percent regulatory duty would be much less than the fixed rates, he said, adding that the domestic industry has the capacity to produce more than 160,000 tonnes per annum, which was sufficient to meet the demand of jute goods in the country.
Jamil said, at present, the utilisation of capacity was low at 60 percent and the utilisation of seven jute mills, which are operating in the country, was more than 80 percent.
He urged the government to allow 5 percent EMA on export of jute goods, which would further boost its export and help them in competing with Bangladesh, which was also paying 5 percent cash subsidy to the exporters of jute goods of state-owned Bangladesh Jute Mills Corporation (BJMC).
BJMC produces 50 percent of the total production of jute goods in their country, which was incurring a loss of Rs 4.05 billion annually.
He also said that even neighbouring India has allowed EMA and Duty Entitlement Passbook on export of jute goods since 2002.
The increase in exports by a local mill, Thal Jute, clearly shows that the small gesture from the government by allowing only 5 percent EMA to the domestic jute industry could further boost the exports, he added.
Appreciating the Commerce Ministry for allowing duty-free import of raw jute from Bangladesh, he said that the duty on raw materials was reduced from 10 to 5 percent during 2002.
Consequently, he said, the effective rate of duty on raw materials for Saarc countries was reduced from 7.5 to 3.5 percent, which was subsequently further reduced to zero percent for the South Asian countries.
This resulted into increase in production of jute industry by 17 percent in one year, he said, adding that the production of jute goods in the country had increased from 81,656 tonnes in 2001-02 to 95,485 tonnes in 2002-03.
"During the current fiscal year, we are expecting it to increase further by more than 15 percent," he added.
The duty on import of jute goods was reduced in 2002 from 30-25 percent which further narrowed down the protection to the local jute industry, he said.
Jamil said the consistent rollback of tariff from 55 percent in 1999 to 25 percent in 2002 had exposed the local jute industry to the threat of cheap subsidised goods available in Bangladesh.
He also asked the government to allow import of Jute industry-related spare parts from India.
He assured the government that Pakistani jute mills would not use the price preference for increase in the price of jute bags. "We will use it for protection of the jute industry, he said, adding that the average increase in selling price of jute bags during the last five years comes to 0.9 percent annually.
The price preference to the local jute industry is justified on account of these reasons:
Firstly, the minimum wages in Bangladesh is 1,350 taka and Rs 2,500 in our country, which has increased our cost of production by Rs 3 per bag; secondly, it is labour-intensive industry with wages component of 20-30 percent of the cost of manufacture; and thirdly, value addition is about 140 percent and industry is saving more than $30 million in foreign exchange on import substitution. Out of 140 percent of value addition 60 percent is salary and wages.
He hoped that these measures would provide a level playing field to the domestic jute industry, which would help in boosting the export earnings, generate employment and greatly help the industry in utilising idle capacity, which would financially strengthen the industry and increase the country's GDP.