The drying ports

LAHORE: With a desire to increase revenues immediately economic planners impose measures without bothering to evaluate their impact on overall economy, job losses, and eventual fall in revenues. Punjab Infrastructure Development Cess (PIDC) is a glaring example of it.

The Punjab Infrastructure Development Cess (PIDC) was imposed through an act in 2015 at a rate of 0.9 percent on dry ports for goods imported into or exported out of Punjab. This was in line with a similar Cess imposed in Sindh on all imports at the rate of 1.10 to 1.15 percent on total value of goods; for providing resources for maintenance, development and improvement of infrastructure.

Imposition of Punjab infrastructure Development Cess (PIDC) was an additional tax burden on the businesses in Punjab that escalated their cost of doing business. This forced Punjab based importers to get their goods cleared at Karachi. This resulted in massive income losses for the Dry Ports in Punjab in terms of services charges (usually between Rs10,000 to Rs15,000 per 20-feet container) and diversion of Tax Revenues (Custom Duties, Regulatory Duties and Sales Tax etc.) from Punjab to Sindh.

On the employment front, it causes adverse impact as the business of clearing agents, transportation companies and other allied services are hampered due to shifting of Business to Karachi. Due to imposition of this Cess share of total imports at dry ports of Punjab in Pakistan’s total imports decreased steadily over time from 8.13 percent in 2011-12 to 4.29 percent in 2019-20.

According to PRAL data on Punjab Dry Port performance the total clearance of imported goods in 2013-14 (prior to imposition of PIDC) was worth $3.09 billion out of national imports of $45.01 billion. At that time this constituted 6.82 percent of the total imports in Pakistan. After the imposition of PIDC the import clearance from Punjab started declining constantly. In 2019-20 the value of goods cleared at dry ports in Punjab reduced to $1.91 billion out of total imports of $44.55 billion. The share in total imports was reduced to 4.29 percent. The worst to suffer was Sialkot dry port where imports clearance dwindled by 80 percent in dollar terms and 66 percent in rupee terms.

The labour at the Lahore Dry Port has decreased significantly from 3,179 in 2016-17 to 97 in 2019-20. The number of transporters has also decreased from 283 in 2016-17 to 16 in 2019-20. The number of active Clearing Agents at Lahore Dry Port has decreased from 785 in 2016-17 to 18 in 2019-20 while the staff employed by clearing agents contracted from 22,000 to 4,200 in the same period. This means a cumulative job loss of 20,882 at Lahore dry port only.

The picture at Faisalabad Dry Port is also bleak in terms of employment. The number of employees at the Faisalabad Dry Port has plunged from 300 in (2008-2014) to 83 in (2015-2020). The number of Trucking Companies at Faisalabad Dry Port has decreased from 32 in (2008-14) to 7 in (2015-2020). The number of Clearing Agents at Faisalabad Dry Port has decreased from 50 in (2008-14) to 10 in (2015-2020). In the same period, the number of importers at Faisalabad Dry Port decreased from 185 in (2008-14) to 50 in (2015-2020).

All major importers from Punjab are now getting their goods cleared at Karachi. The Dry Ports in the province are giving a deserted look. The Punjab government is hardly collecting Rs2.5 billion from this. In the process it has lost the service charges that it collected from the clearing agents and made the cost of doing business in Punjab higher. This government is champion in finding faults with even the best policies of the previous PML-N government but has failed to remove this genuine PIDC measure just because it generated some revenue at the expense of thousands of jobs.

The imposition of PIDC has resulted in a massive congestion at Karachi Port as most of the consignments destined for Punjab are cleared from there. Containers remain stuck at Karachi Port for almost a week. This essentially means that the huge capacity at the Dry Ports in Punjab is not utilised due to PIDC. It is pertinent to mention that the cost of warehouses in Karachi is more than four times of that in Punjab, which adds significantly to the cost of doing business.