The Commerce Division and NTC have identified tariff lines which are being considered for revision of tariffs in the budget 2018-19, to bring positive improvement in the tariff structure. While a comprehensive tariff policy for industrial expansion including the medium and long-term measures is being developed, in the short term the immediate rationalization of tariff is being considered on 515 tariff lines containing inputs and products related to textiles; industrial as well as food items are also being considered for revision of tariff in the Budget 2018-19, as a short term and immediate measure.
The Commerce Division is currently working on the formulation of Strategic Trade Policy Framework (STPF) 2018-23 in consultation with the stakeholders. As identified by Commerce Division, one of the key enablers for increasing the competitiveness of the export sector is the rationalization of tariffs on critical inputs of export-oriented industry.
The sources said in this context Commerce Division in consultation with its sub-ordinate body, ie, NTC has identified the inputs/raw materials of the export oriented products to rationalize their tariff structure in order to make exports more competitive and facilitate participation of local manufacturers, including SMEs, in global and regional value chains.
In its proposal, Commerce Division has suggested not only a reduction in existing Customs Duty on these items but also suggested removal of Regulatory Duty on textile and steel related items imposed/increased vide SRO 1035(I)/2017.
As projected by Commerce Division the proposed tariff rationalisation will improve the competitiveness of the leading export sectors including textiles, apparel, leather, spices, chemical products, plastics and articles thereof, iron and steel.
The Commerce Division had set the deadline of March 22, 2018 for industry to send representations, if any, with specific objections on this exercise.
According to sources local industry has submitted a number of representations, rejecting the proposed rationalisation, with the request that suitable amendments be made in the proposal in accordance with their recommendations.
Since last few years the Commerce Division is under severe criticism on increase in trade gap due to decline in exports and increase in imports including from China. Realizing this fact and to discourage imports into Pakistan, the Commerce Division suggested imposition/revision of Regulatory Duty (RD) on steel, textile and other related products which not only included finished goods but there were certain raw materials used by industries on which regulatory duty was increased. Resultantly, anomalies were created in certain products where duty on raw materials became higher than the finished product due to which manufacturing sector suffered severely.
However, a stakeholder acknowledged that tariff rationalization exercise is very important and need of the hour as well as demand of industry. It should have been initiated at the time when Federal Board of Revenue started discontinuing concessions in duties and taxes provided under several notifications, on the instructions of international financial institutions with the objective to achieve revenue targets.
"Local industry started suffering badly after adverse budgetary measures initiated by FBR since 2013. The then Finance Minister Ishaq Dar started this move and instructed FBR to reduce/eliminate concessions available in duties and taxes. Several SROs and other relevant schedules were revised in this regard," he added.
Under this move not only concessions available under several notifications were withdrawn but customs duties on finished goods were also reduced to bring maximum tariff rate at 20% from 25%. Tariff slabs were also reduced to four from six which reduced the margin of the local industry.
Appreciating the efforts of Commerce Division, the stakeholders from the industry argue that tariff rationalization is imperative after meaningful consultation considering value supply chain and integration of downstream and upstream industry in every sector.
"Stakeholders in government as well as in private sector may be consulted to reach realistic suggestions. The role of the Ministry of Industries & Production, Textile Division & MNFS&R is very important at this stage," he said, adding that the Commerce Division, in this regard should constitute a high powered task force inviting experts from concerned ministries as well as members from private sector to carefully study the entire value supply chain of all the industrial products specially those are manufactured locally and suggest appropriate tariff to enhance productivity and increase exports of the country.