ISLAMABAD - The Economic Coordination Committee (ECC) of the Cabinet on Tuesday gave further three months time for putting up a plan for operationalisation of Pakistan Steel Mills (PSM), that has been closed since June 2015 due to multiple reasons.

The ECC, which met under the chair of Finance Minister Asad Umar, discussed the issue of the PSM. The Ministry of Industries and Production shared with ECC progress on study regarding operationalization of Pakistan Steel. The ECC desired for early completion and submission of the study.

Earlier, the ECC on November 7, 2018 had directed the Ministry of Industries and Production to put up a plan for operationalisation of PSM within 60 days, which prompted the advisor to the prime minister on commerce, industries & production, textile and investment to constitute an expert group to propose various options for revival of the PSM. The expert group informed the ECC that it was working on formulating various options and in view of the enormity of task and other commitments could not complete the task within two months period. The ECC has decided to give further three months for presenting the revival plan for the PSM.

The PSM is dysfunctional since June 2015 due to many reasons. The total losses and liabilities of the PSM have gone beyond Rs465 billion, besides around $2.5 billion foreign exchange loss per annum because of steel imports which could have been produced by the PSM. The incumbent government had recently decided to delist the PSM from the privatisation list along with Pakistan International Airlines (PIA) and other public sector entities.

Meanwhile, the ECC has also considered a summary of Textile Division for withdrawal of custom duty, additional custom duty and sales tax on import of cotton. However, the Committee asked for details/data on revenue impact and trade on proposal of Textile Division regarding withdrawal of custom duty and sales tax on cotton import.

According to the Textile Division summary, a copy of which is available with The Nation, Pakistan has been a net cotton importer since 2001. Further domestic cotton is of short to medium staple length therefore long and extra long staple cotton has to be imported for production of finer yarn counts for subsequent transformation into high value added finished products. Import of cotton has remained duty free till the slab of 0% was abolished in 2014-15 and customs duty (CD) of 1% was imposed along with the 5% sales tax. Later on 1% slab was made 2% and then 3% along with the 2% additional duty to make it 5% i.e. currently cotton is subject to 4% CD and 5% sales tax.

The Prime Minister's Package of Incentives for Exporters was announced on January 10, 2017, wherein textile sector was provided a number of facilitations including withdrawal of customs duty and sales tax on imported cotton, wef, January 16, 2017.

The Finance Division moved a summary to the ECC of the Cabinet to impose the customs duty and sales tax on imported cotton. The ECC of the Cabinet constituted a committee and on the recommendation of the committee, duties were re-imposed from July 15, 2017 in view of arrival of domestic cotton. The textile industry of Pakistan consumes around 12 to 15 million bales per annum. Sustainability and viability of spinning industry is total dependent on performance of the domestic crop. Textile industry has to meet the shortage from import of cotton from other countries. The impact of duties is induced in the price of domestic cotton, resulting in increase in cost of doing business for the entire textiles value chain especially for export oriented sector in highly competitive international markets.

According to Cotton Crop Assessment Committee (CCAC), meeting held by the NNFSR in September 2018, the cotton crop for the year 2018-19 is expected to be around 10.78 million bates of 170 kilogram each, a decrease of 9.7% compared to last year.

To encourage value addition, reduce the cost of doing business and fill the gap between production and consumption as by January 1st, more than 95% of the cotton has been lifted from the farmers, and it is proposed that similar to last year decision, customs duty and sales tax on imported cotton may be withdrawn.