Government likely to revise duty structure on import of PTA, PSF-Texglobe

ISLAMABAD (June 04 2010): The government is likely to revise duty structure on import of Purified Terephthalic Acid (PTA) from 7.5 percent to 3 percent and Polyester Staple Fiber (PSF) from 4 to 6 percent in the upcoming budget 2010-11, Business Recorder has learnt reliably.

However, 3 percent reduced duty rates on the import of PTA would be non-refundable. As a result of these tariff adjustments, the cost of PSF would increase by about 2 percent. Informed sources in the Federal Board of Revenue (FBR) revealed that Textile Ministry has proposed to the government to reduce import duty on PTA from 7.5 percent to 3 percent.

The Ministry has also proposed to revise duty structure for Polyester Spun Yarn (PSY) and other polyester chain according to the National Tariff Commission (NTC) proposals submitted to the government. Sources revealed that government is currently collecting 7.5 percent import duty which is refundable and NTC has proposed the government to revise duty structure for PTA downwards to 4 percent under the cascading principles in the upcoming budget 2010-11. The textile industry's stakeholders has proposed to the government that import duty on PTA should be at maximum 1 to 2 percent," sources added.

PTA known as white powder in the domestic market is used as major raw material in production of polyester fiber, an input in textile manufacturing, polyethylene terephtalate (PET) bottles resins and packaging films. Textile industry stakeholders have submitted following proposals to the government:

(i) At 2% PTA duty, duty on Polyester Filament Yarn should be 11% to maintain the same level of net protection (At 4% duty the duty on PFY would ought to be 12%); (ii) (ii) By $22/ton (or 2.4% of PTA price $920/ton) in 2012 due to reduction of EVTL/ BOC charges from $30/ton to $8/ton; whereas, by $6/ton (or 0.65% of PTA price $920/ton) for catalyst recovery project starting in 2011.

(iii) The benefits of own power plan (including increased production) will be used to finance the cost of self generation power plant. The facts to support the above are as below: The PTA import duty should not be at the dilution of current protection of downstream as it will also harm the prospects of PTA growth in Pakistan. The PTA import duty in 3 countries of the Far East (Thailand, Indonesia, Malaysia) is 0% even though each of these countries have 2 to 3 PTA production plants. The down stream duty on fiber (PSF), Filament yam and PET, resin from non-Asean countries is between 5 to 15 percent.

The PTA duty in Korea is 3 percent but the duty on its own raw material PX is also zero, giving a nominal protection of zero while on downstream eg PET resin the duty is 6.5 percent. With the current PTA consumption at around 550,000 tons/yr and production capacity at 500,000 tons, PTA will not expand unless the demand (downstream) does not grow by another 200,000 to 300,000 tons even if PTA duty rate is high.