BY

In response to my article, "Case For Rationalization of Import Duty On Yarn", published in Business Recorder on May 16 and 17, 1996, the avuncular and mild-mannered Secretary of Filament Yarn Manufacturers Association, Mr M H K Burney, countered with his article : "Another approach to import duty on yarn", which was published on May 23, 1996. At the outset, It should be pointed out that a better title would have been "Confusing approach to import duty on yarn". It is thus essential that comments be made on Burney’s article.

First of all, he has misread EPB’s recommendation on reduction of duty. The Bureau proposed a reduction OF 30% and not reduction TO 30%. This practical suggestion by EPB was the need of the hour and there are absolutely no restrictions on EPB to propose pragmatic changes in the duty structure if the expected change would spur up exports. The government gives a lot of importance to Mian Habibullah and his team in EPB. The proposal is worth all the merit it deserves and the government should adopt this in toto.

Burney then informs the readers that CBR called a meeting on May 4, 1995 where representatives of Pakistan Silk and Rayon Mills Association (PSRMA), Pakistan Yarn Merchants Association (PYMA), and FYMA were present. He notes that CBR accepted the proposal of the first two Associations to reduce the duty to 35%. Unfortunately, instead of giving the background, he deemed it fit to accuse me of misleading "the government thru his high sounding verbosity sarcastically camouflaging actual facts and figures". Well , the facts and figures are simple, which Burney should have provided himself.

On November 22, 1994, the Commerce Minister, Ch. Ahmad Mukhtar, presented the Textile Package to provide relief to the textile sector. Alas, the Customs Duty was reduced for all items EXCEPT yarn. In December 1994, the government issued a SRO removing fabrics from the negative list. There was no compensation nor benefit to those consuming imported yarn. At that time the duty on yarn was over 90%. Moreover, during the May 1995 meeting, the import price of polyester chips had crossed US$ 2600, a fact confirmed by Burney. Sad to say, immediately after the textile package was announced, the FYMA members went on to increase prices rather than reducing it and passing on the benefits to the weavers. This is the oligarchic mentality which I had referred to in my article.

Inspite of this, PSRMA and PYMA members did not want to rock the boat, and keeping the adverse situation of the polyester chips prices in mind, agreed to a 35% duty regime. But that was a year ago. Today, polyester chips prices are between US$ 850-900. The scenario has changed. The parameter has changed. The market situation has changed. Furthermore, it should be known that the FYMA representative was reprimanded by the Chairman of the meeting for the way he was presenting the case, and if it wasn’t for the intervention of the PSRMA Chairman, the CBR officials would have made mincemeat of the FYMA representative.

Burney talks about the arbitrary attitude of the PSI agencies (COTECNA and SGS). This is nothing new. These people have different prices for the same product., for the same consignment, on the same vessel, for the same importer’s companies, sent by the same producer. Everybody and his uncle are fed up with the mismanagement of the PSI agencies. Even Ejaz Shaffi, MNA, has not been able to get the government to inform the National Assembly how much these agencies are getting for their trouble to screw up the country’s systems.

Burney categorically denies his Association’s intentions for any hostile move. The inference was on my remarks that threatening to "pull down shutters" amounted to a veiled threat to subjugate the government to agree to their unjust demands. It is hoped that they will not resort to this tactic as it will be counter-productive for them in the long run.

A surprising paradox is that the FYMA members lost over 50% of their equity base in the last two years which Burney highlights prominently, while at the same time, they went on a buying binge and doubled production capacity which Burney also agrees. This is something worth considering. The members are in a deep quagmire but they have the wherewithal to go and buy the world. If the capacity increased was financed by the DFIs there must be a catch somewhere. A sinister thought is remembering Mehran Bank or UBL.

Moreover, Burney talks about the role of commercial importers of yarn and their stranglehold on the small time weavers. Most of the FYMA members fall into the category of commercial importers indentors and they have all fingers in the pie. Burney should have thought twice before putting this fact in print.

Burney proposes an "Artsilk Powerlooms Development Fund" by the government to give cheap loans to the small weavers. It is a good suggestion, but the fact is that most of the money of the weavers is tied up in buying raw material on COD from the FYMA dealers. He then fears that if yarn duty is not subjected to additional regulatory duty, in the same way that Staple Fiber manufacturers got the government to do, the foreign manufacturers will dump yarn into the country. For crying out loud. There is your COTECNA and SGS to check this out and as Burney knows, PSI agencies set their own high valuations. There will be no resort to dumping, one may emphasis and allay the fears of Burney.

Burney talks about the lack of a labor crisis because according to him not many weaving mills are closed. He himself knows, and he has painstakingly painted a picture of the weaving scene, that most of the looms are in family-oriented units and families do not go on a strike in their own abode.

The bottom line is that there is a sound and pragmatic case for the reduction in import duty on yarn. In the meantime, FYMA members can get their act together and evolve better quality products so that the little bit that is being imported into this country would cease and weavers would, observing their national duty, go on to buy locally produced yarn. The FYMA members should be magnanimous and should look into the needs of the consumers, both the weavers and the general public. FYMA has progressed in leaps and bounds because of the patronage of the weavers. I rest my case !