ISLAMABAD: The government has approved significant reductions, including exemptions on raw materials under 600 tariff lines to stimulate import substitutions from consumer industries and promote exports from traditional and non-traditional sectors.
The decision will be announced in the 2021-2022 budget. There are also several other tariff lines which will be subject to a lower tariff reduction. In the 2020-21 budget, the government reduced tariffs on 2,000 tariff lines.
Before the next budget, the National Tariff Commission submitted to the Ministry of Finance a report which shows that the government’s tariff rationalization plan has led to industrial growth in the country. The exemption from duties on raw materials results in its bulk importation and subsequent exports from these industries.
As a result, at the sectoral level, exports of textiles, wooden articles, rubber, plastics, glass, metal, chemicals and electrical appliances are strongly affected by the change in the tariffs of intermediate inputs.
The study reveals that a decrease of 1pc in customs duties leads to an increase in the volume of imports of 2.8pc. Likewise, the price of raw materials (unit value) decreases by 0.6pc with a reduction of 1pc in customs duties at the import level.
The government removed 3pc of customs duty (CD) and 2pc of additional customs duty (ACD) on the import of jute fiber, a raw material, in 2019-2020. As a result of the rationalization, the value of jute fiber imports increased from $ 30.7 million to $ 50.2 million in 2020-2021. Jute fabric exports reached $ 7.8 million in 2020-2021, up from $ 0.013 million the previous year. It clearly establishes a link between the tariff reduction and the subsequent increase in exports.
Nitrile butadiene rubber (NBR) is used in industrial gloves. The government exempted 3pc CD, 2pc ACD in 2019-2020. As a result, the value of NBR imports increased to $ 6.6 million in 2020-2021, from $ 4.1 million the year before. Exports of industrial gloves reached $ 92.4 million in 2020-21 compared to $ 67.4 million in 2018-19.
The government has exempted 3pc CD, 2pc ACD on wood pulp, a raw material used in paper and board. The value of imports of the raw material increased to $ 8 million in 2020-2021 from $ 6 million the previous year. And exports of finished paper and board products reached $ 3 million in 2020-2021, up from $ 0.7 million the year before.
The government exempted 3pc CD and 2pc ACD on the import of tire cables, a raw material used in the manufacture of motorcycle tires, in 2019-2020. The value of imports of the raw material reached $ 18.3 million in 2020-2021, compared to $ 13.9 million the previous year. Motorcycle tire exports reached $ 9.65 million in 2020-21, up from $ 4.03 million in 2018-19.
Likewise, the government exempted 3pc CD and 2pc ACD on natural rubber, a raw material used in the manufacture of footwear. As a result, footwear exports increased to $ 28.058 million in 2020-2021, from $ 20.851 million the year before. Growth was also manifested in terms of quantity.
Regulatory fee 20pc CD, 7pc ACD and 5pc regulatory (AD) has been abolished on glass boar, a major raw material of LCD and LED in 2019-2020. LCD and LED units reached 59,990 units in 2020-2021 compared to 7,452 units the previous year. It clearly reflects the impact of tariff rationalization.
The government has removed 7pc ACD, 5pc RD and reduced CD from 20pc to 5pc on import of ethylene polymers, non-woven, raw material used in diapers. As a result, the value of diaper imports reached $ 50.293 million in 2020-2021, compared to $ 13.550 million in the previous year. Growth was also observed in quantity.
Raw materials of palm stearin and tallow used in the manufacture of toilet soap. The government abolished 2pc ACD and reduced the CD to 5pc from 11pc on these commodities. As a result, the production of toilet soaps increased to 200,000 tonnes in 2020-2021 from 155,000 tonnes in 2018-19. Exports of toilet soaps increased to 16,000 tonnes in 2020-2021 against 8,000 tonnes in 2018-19. Pakistan is one of the major suppliers of toilet soap to the European Union.
Posted in Dawn, le 8 June 2021