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Pakistan eyes $28 billion textile exports by 2025

"The recently approved Textile Policy 2020-25 of Pakistan sets an ambitious target of increasing the country’s textile exports to $28 billion by 2025. To achieve this target, the country aims to boost cotton production from nine million bales to 20 million bales within five years. It also aims to improve the quality of cotton seeds besides introducing latest farming and picking practices will be introduced. The government will also emphasise on the production of long staple cotton to reduce dependence on imported cotton."

Pakistan eyes 28 billion textile exports by 2025The recently approved Textile Policy 2020-25 of Pakistan sets an ambitious target of increasing the country’s textile exports to $28 billion by 2025. To achieve this target, the country aims to boost cotton production from nine million bales to 20 million bales within five years. It also aims to improve the quality of cotton seeds besides introducing latest farming and picking practices will be introduced. The government will also emphasise on the production of long staple cotton to reduce dependence on imported cotton.

The policy highlights the issue of lack of availability of Man Made Fiber (MMF) at competitive prices. At present, Pakistan’s consumption is around 30 per cent as compared to its 70 per cent consumption of cotton. In future, it aims to increase this ratio to 50:50.

Simplifying application for temporary import schemes

So far, limited access to raw materials has prevented Pakistan from achieving its full export potential andPakistan eyes 28 billion textile exports product diversification. It now plans to simplify the application process for temporary import schemes besides allowing inter/intra-bond/scheme transfers of intermediate products to direct or indirect exporters and commercial importers. This will enable the country to achieve price competitiveness and product diversification.

The withdrawal of zero rating or SRO 1125 has created a serious liquidity crisis for the export sector. Though the government had withdrawn the zero rating system to collect sales tax from domestic sales, it has completely failed and billions of rupees of refunds are stuck in the system.

Increase in overall LTFF limit

The textile policy also increases the overall limit of LTFF (long term financing facility) by $1 billion per year for each upcoming year. The LTFF scheme will now be extended to the entire value chain including building infrastructure costs of garments and knitwear sectors. LTFF for projects will be provided to achieve international sustainability requirements i.e. effluent plants, etc.

The policy also reveals that the ministry aims to set up state-of-the-art industrial zones to accelerate exports by providing Plug and Play facilities, specially for garmenting units. Workers’ residential colonies are to be developed through the prime minister’s housing scheme around SEZs.

Limiting DLTL to garments and made-ups

Under the Textile Policy 2020-25, after 2021, the provision of Drawback of Local Taxes and Levies (DLTL) will be limited to garments and made-ups. Currently, it is provided to segments that include four percent for garments, three percent for made ups and two percent for processed. Additionally, 2 per cent duty drawback is provided for non-traditional markets and 50 per cent is given unconditionally and remaining on 10 per cent growth.

The textile policy also highlights that through the Finance Act 2013, the government had raised the General Rate of Minimum Turnover Tax under Section 113 of the Income Tax Ordinance 2001 to 1.5 per cent through the Finance Act, 2019. However, now it plans to revert to 0.5 per cent tad and also include indirect exporters under this tax.

 
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