Ministries of Commerce and Textile Industry have reportedly locked horns with Federal Board of Revenue (FBR) for opposing increase in duty on Pet Resin (yarn grade, bottle grade and film grade, well informed sources in Commerce Ministry told fbr times. However, all public sector stakeholders are on the same page on proposed increase in duty on Pure Terephtahalic Acid (PTA) from existing three per cent to four per cent, the sources added. The sources clarified that in order to protect existing investment made by M/s Lotte, Board of Investment (BoI) requested Commerce Ministry for an upward revision of customs duty on PTA from three to five per cent in March 2013. Ministry of Commerce moved a summary to the ECC for revision of tariff on PTA after consulting all the relevant stakeholders. ECC considered the summary on March 6, 2013 and deferred the decision with the direction that the National Tariff Commission (NTC) should carry out a fresh study and place recommendations before the ECC. In pursuance of ECC decision, NTC carried out a fresh study and recommended that customs duty on PTA should be increased from three per cent to five per cent, yarn grade from three to four per cent, bottle grade from 8 per cent to 8.5 per cent, film grade from 8 per cent to 8.5 per cent. NTC did not propose any change in duty on Polyester Staple Fibre (PSF) and Polyester Filament Yarn (PFY). NTC further recommended that the duty on PTA and its value chain products may be reconsidered after one year of the decision and a report may be submitted to ECC within three months of the expiry of one year after ECC decision. According to sources, one per cent increase in duty on PTA would save the PTA industry from cash losses but it would have an insignificant impact on the cost of PTA and PFY industries. The NTC analysis has revealed that PTA manufacturing industry would still be at a loss of 5 per cent customs duty. In-spite of this it is essential that the duty on PTA be increased to an extent where the cash losses to industry can be avoided and have a minimum impact on the downstream industries. Official documents reveal that NTC held public hearing on May 20, 2013. Stakeholders including the manufacturers of PTA, PSF and PYF and Filament Merchant Association were present. During the public hearing Lottee Chemical Pakistan Limited argued that the present tariff protection in the form of 3 per cent customs duty is not adequate as PTA is facing a situation of oversupply in the international market. The conversion margins for the domestic industry have been reduced to the minimum and domestic industry is on the verge of closure. The company representative requested to increase the custom duty on import of PTA to 5 per cent. ICI Pakistan argued that the phenomenon of oversupply is temporary. The current duty structure was set after reaching a consensus by all stakeholders. Therefore, the status quo in the duty structure of all products in value chain may be maintained. Ibrahim Fibres Limited stated that the domestic PTA industry is charging extra five per cent on the landed cost of PTA. Therefore, the customs duty on PTA may be reduced to zero. Gatron and Novatex Ltd requested that current duty structure of 3 per cent on PTA should not be changed. Alternatively, if it is at all increased, and protection or duty support for PTA is recommended then the protection for all the segments of the value chain should be proposed to increase accordingly to maintain the existing levels of protection being enjoyed by all the value chain. Filament Yarn Merchant Association pleaded that the tariff on PTA should not be changed because it will have a negative impact on downstream industries making them further uncompetitive. The NTC argued that there is an oversupply of PTA. The price of raw material of PTA ie P-xylene has an acknowledged upward trend in the international market. However, due to oversupply of PTA across the globe, PTA industry is unable to increase its selling price. This situation may change if following happens: (i) supply of P-xylene increases; (ii) demand of PTA increases; or (iii) some PTA units close down. NTC maintains that Lottee is suffering losses and the government may assist the industry by providing necessary tariff support for a limited period so that industry can avoid closure. It was observed in the study that both PTA and yarn grade have customs duty at 3 per cent. PTA is a raw material of Pet Resin - yarn grade. In case duty of PTA increases this will result in tariff anomaly. Therefore, duty on yarn grade may also be adjusted with the same proportion as of PTA. The increase in the duty of PTA, sources said, will have marginal affect on Pet Resin- bottle and film grade. The duty on these products also needs adjustment. The sources said, tariff set for polyester value chain as a result of study in 2010 was rational for the entire value chain. However, the changes in international market have upset the PTA industry. The difference between PTA and its downstream products have changed favourably for downstream industries.
Posted on: Mon, 26 Jan 2015 07:28:25 +0000
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