Duty on PSF may be increased by 1.5 percent: ECC meets today-Texglobe

KARACHI (June 29 2010): The government is considering increasing the import duty on Polyester Staple Fiber (PSF) from 4.5 percent to 6 percent a move that aimed at protecting local manufacturers. Sources in the textile industry told Business Recorder on Monday the Economic Co-ordination Committee (ECC) would review the PSF duty structure in its meeting on Tuesday, June 29.

The Ministry of Textiles has recommended increase in PSF import duty to 6 percent from 4.50 percent. It has also suggested cut in import duty on Pure Terephthalic Acid from 7.5 percent (refundable) to 3.0 percent and introduction of a duty drawback structure for the value-added sector.

Sources added that these recommendations would be discussed in the Tuesday's meeting of the ECC, however duty revision of PSF tops the agenda of the meeting. The step is being taken on the demand of local PSF producers as they want to enhance the commodity prices but are compelled to market locally produced PSF at reasonable rates due to cheap import by the spinning sector.

Sources said in the previous meeting the same issue was discussed and Finance Minister Hafeez Shaikh had asked Deputy Chairman, Planning Commission Dr Nadeem-ul-Haq to review the case and present a comprehensive report in the next meeting. In Tuesday's meeting, the Deputy Chairman, Planning Commission will give his recommendation to the committee, which will take a final decision.

According to the annual report of PSF manufacturers, there are some five PSF producers in Pakistan with a maximum production capacity of 611,500 and the largest producer is Dewan Salman Fibre having a production capacity of 240,900 tons. However, presently Dewan Salman Fiber is closed due to financial crisis. The remaining producers are working at 90 percent capacity.

On the other hand the domestic spinning industry has shown serious reservations over the proposal of increase in PSF import duty asking the government for zero duty on PSF. All Pakistan Textile Mills Association (Aptma) has also approached the ECC and demanded that all stakeholders be taken on board before any decision.

"On the one hand the textile industry is facing crippling domestic shortage of PSF on account of the shutdown of Dewan Salman Fibre Limited and, on the other, all options for the textile industry to procure PSF on competitive terms from international as well as domestic sources are being shut off," said a letter sent by Aptma to the ECC members.

Aptma claimed that presently the local production of PSF stood at 335,000 tons as compared to consumption of 370,000 tons annually. It clearly shows that the local market is facing shortage of PSF and at this stage increase in duty is unrealistic.

They said PSF is a substitutable product of cotton, which has zero percent import and export duty and therefore there is no logic in levying import duty on the PSF. 'Punitive' import duty combined with anti-dumping duty on the import of PSF from different sources has already made locally available PSF highly over-priced.

"Aptma's stance has always been that all the raw material, including PSF, should not be subject to any import duty at all. We, therefore, request that there should be zero import duty on PSF," spinners demanded in the letter written to the ECC members.

"Import duty imposition would only result in making our value-added products more uncompetitive and hurt Pakistan's exports, therefore we strongly believes in a free market mechanism and zero percent import duty on PSF is the only way to increase synthetics consumption in Pakistan and, therefore, to confirm cheaper yarn availability to the downstream," Aptma said.

Pakistan is facing extreme shortage of PSF due to closure of Dewan Salman Fiber. Its share stood at about 35 percent of overall production and presently the spinning industry is facing serious shortage of both primary raw materials including cotton and polyester, Aptma said.

It added that if Pakistan has to achieve an export target of $20 billion in next few years and create hundreds of thousands of jobs, all restrictions and tariffs on the import of raw materials that are of limited availability in Pakistan, must be removed.