LAHORE - Ministry of Textile Industry (MoTI) has principally agreed to reduce tariffs on textile. Tariff rationalisation will be initiated from the next fiscal year (2012-13) that will bring down tariffs to 10 per cent in a phased manner, Profit learnt on Friday.
In a recent Tariff Reforms Committee meeting Planning Commission (PC) Deputy Chairman Nadeem ul Haque pointed out that textile was an export sector and it did not make sense to have a protection regime for it. MoTI agreed with the observation and showed willingness to reduce tariffs.
It was decided in the meeting that MoTI would prepare a plan for tariff reduction and submit its recommendation to the Economic Coordination Committee (ECC) of the Cabinet within two weeks. It was pointed out in the meeting that protection on textile was depriving domestic consumers and benefiting producers at their cost shifting consumer surplus to the producers. Addressing the meeting participants, MoTI Secretary expressed his dissatisfaction over the consultants’ report titled; ‘Pakistan Trade Policies: Future Directions’. He indicated that consultants ignored the Term of References (TORs) in their report and did not calculate Net Profit Ratio (NPRs) and Earnings Price Ratio (EPRs). The report also overlooked the tariff practices, he maintained.
It was decided in the meeting that Federal Board of Revenue (FBR) led sub-committee would submit its recommendations to ECC for approval within eight weeks. The progress made by Ministry of Commerce (MoC) led sub-committee on reviewing the regulatory role of Engineering Development Board was also discussed in detail. Discussion transpired that MoC led sub-committee so far had made negligible progress thus it needed to be disbanded. Planning Commission deputy chairman also enquired from the FBR Chairman as to what was the way forward for implementation of recommendations of sub-committee led by FBR. He was of the view that the general tariff would be brought down to 10 per cent within the next three years. He explained that it had to be taken to ECC for ratification. Later on these recommendations needed to be taken to the Parliament as a money bill.
Pragmatic phasing out policy
Engineering Development Board (EDB) General Manager Dr Muhammad Zubair disclosed that EDB was performing its functions under six SROs of which one was issued by the MoC and five were issued by the FBR. He pointed out that MoC led sub-committee on reviewing the regulatory role of EDB, held a meeting and formed a preliminary report wherein the sub-committee endorsed the regulatory role of EDB. He said that the sub-committee had reached a consensus that discriminatory tariff regime for investors and commercial importers had created distortion and inefficiency besides, discretionary licensing power to EDB. In this connection, however, FBR Chairman suggested that a pragmatic phasing out approach spanning over three to five years was imminently required. A firm and categorical policy stance on the auto sector would serve a signal to local automobile industry to improve efficiency otherwise it could not be protected at the expense of consumer welfare in the changing global and national scenarios.
Timeframe for withdrawal
To improve the regulatory role of the EBD, the MoC led sub-committee was disbanded. Discriminatory tariff for commercial and non-commercial is needed to be done away within three years in a phased manner along with bringing it down to a 10 per cent uniform rate. The meeting further decided that EDB and National Tariff Commission (NTC) would chalk out a timeframe for withdrawal of concessionary tariff within three years. Revenue Advisory Council (RAC) would be asked to review SROs (656, 655, 575 and any other) pertaining to EDB role in granting discriminatory tariff for industries and commercial importers and the final report would be submitted to the PC deputy chairman within six weeks. PC Joint Chief Economist (Macro) Sohail Rehan pointed out that the FBR led sub-committee had finalised recommendations to bring down general tariff slabs from eight to six (from 0 per cent to 25 per cent) on over four hundred (400) items excluding auto related items.