Budget 24-25 to destroy textile industry: Aptma

ISLAMABAD: The textile industry Thursday strongly protested the “regressive and punitive tax and customs-related measures” proposed in the Finance Bill 2024-25, which pose an existential threat to it. The textile sector contributes over 50% of total export earnings and employs 40% of the industrial labour force.

“The collapse of this sector would lead to massive job losses, further exacerbating the already high unemployment rates. The reduction in export earnings would widen the trade deficit, putting additional pressure on the country’s foreign exchange reserves and increasing the risk of a balance of payments crisis. Moreover, the proposed measures will halt new investment in productive export-oriented activities, leading to a further decline in industrial capacity. The flight of capital from the formal, documented sector to the informal sector will increase, reducing government revenue and worsening the fiscal deficit,” said Chairman All Pakistan Textile Mills Association (Aptma) Asif Inam, ex-chairman Aamir Fayyaz and Chairman North Kamran Arshad in a joint presser.

“This will create a vicious cycle of economic decline, with reduced growth prospects and heightened risk of sovereign default on both domestic and foreign debt obligations. The Finance Bill 2024-25, in its current form, not only fails to address the existing disadvantages faced by manufacturers but actively worsens them. It protects foreign suppliers at the expense of local industry, undermines the competitiveness of Pakistani exports and threatens the overall economic stability of the country.”

They said the proposed tax measures will serve nothing but to unequivocally destroy this vital sector, causing irreparable harm to Pakistan’s economic stability and export capacity.

APTMA’s top leadership highlighted five issues including 1) Withdrawal of zero-rating on local inputs for export manufacturing; 2) additional customs duty of 2% on cotton and high-performance MMF (man-made fiber); 3) 2% advance tax on export proceeds/29% income tax on exporters; 4) no allocation of funds to address industry liquidity stuck in various refund regimes; and 5) failure to rationalize duties on PTA (Purified Terephthalic Acid) and PSF (Polyester Staple Fiber).

The Aptma called for urgent reconsideration of these “destructive measures” to prevent complete collapse of the textile sector and to safeguard Pakistan’s economic future. Inam said withdrawal of zero-rating on local inputs for exports (through EFS) will significantly disadvantage domestic producers of intermediate goods like yarn and cloth. “This regressive measure will reduce domestic value addition in exports, as exporters will favor duty-free and sales tax-free imported inputs over expensive local ones, undermining the competitiveness of domestic manufacturers.” Talking of imposing 2% customs duty on cotton and high-performance man-made fibers (MMF), APTMA leaders said it will severely impact the SMEs sector, including domestic yarn and cloth manufacturing. This measure will favor foreign suppliers over local manufacturers, leading to increased costs for domestic production and further stagnation in domestic cotton productivity. The textile industry, consuming 14-16 million bales of cotton annually, will suffer greatly as reduced domestic cultivation exacerbates the existing shortfall, necessitating higher imports. Inam also drew the attention of the government towards the proposed 2% advance tax on turnover, adjustable against a 29% tax on income (effectively 39% after super tax), saying it will deplete liquidity and profitability in low margin, high-volume businesses like textiles. This excessive tax burden, coupled with high operational costs, will erode the competitiveness of Pakistani exporters, driving customers to countries with more favorable tax policies.