KARACHI:
Major textile and cotton associations have issued a stark warning over the state of Pakistan’s textile industry, calling for urgent government intervention. The All Pakistan Textile Mills Association (APTMA), Pakistan Cotton Ginners Association (PCGA), and the Karachi Cotton Association jointly demanded the removal of yarn and fabric from the Export Facilitation Scheme (EFS) and the abolition of the 18% sales tax on domestically produced cotton and yarn.
Addressing a press conference at APTMA House on Tuesday, APTMA Central Chairman Kamran Arshad—joined by industry representatives Asif Inam, Naveed Ahmed, Khawaja Muhammad Zubair, Jesomal, and Sham Lal—criticised the policy of zero-rated imports while heavily taxing local production, calling it “anti-national.” Arshad said that this policy shift had caused significant harm to local manufacturers, forcing 120 spinning mills and over 800 ginning factories to shut down.
He emphasized that the textile industry had consistently raised concerns with policymakers and even during meetings with the International Monetary Fund (IMF), arguing that the current tax burden is unsustainable. Arshad warned that without immediate reform, Pakistan risks losing its textile base entirely or seeing it shift overseas, particularly in light of rising global trade pressures such as a potential U.S. tariff escalation.
Arshad blamed the EFS for pushing the industry to the brink, noting that while industry losses were raised with the IMF, the matter was deferred to Pakistan’s Federal Board of Revenue (FBR). In response, Prime Minister Shehbaz Sharif has formed a review committee headed by Planning Minister Ahsan Iqbal to evaluate the policy’s impact.
Urging the government to reduce its own expenditures rather than overtaxing industry, Arshad drew parallels with the iron and steel sector, which he claimed lost over Rs300 billion due to similar policy missteps. He warned that more textile units will close unless corrective action is taken.
Karachi Cotton Association’s Sham Lal said poor government policies have decimated local cotton production—from 15 million bales to just 5 million—adding to the crisis. With local factories closing, he questioned what would become of imported American cotton.
PCGA’s Mahesh Kumar blamed sugar mills for damaging the cotton sector and revealed that ginning factories are now burdened with 5.5 million bales of unsold cotton. As a result, many ginners are defaulting on loans due to the financial strain.
PHMA Defends EFS, Criticises APTMA
However, the Pakistan Hosiery Manufacturers and Exporters Association (PHMA) presented a contrasting view, defending the EFS and criticising APTMA’s opposition.
PHMA Chairman Babar Khan argued that the imposition of sales tax under the EFS was anti-export and warned that taxing imports would harm the country’s export potential. He called for the reinstatement of EFS in its original form under SRO 957, as it existed before the 2024–25 federal budget, so the entire textile value chain could benefit from tax exemptions.
Khan questioned APTMA’s sudden reversal on EFS, pointing out that the association had supported the scheme since 2021. He accused APTMA of launching a misleading campaign that undermines the value-added textile sector, which he claimed has the potential to boost exports beyond $50 billion.
He also called on the government to level the playing field for all stakeholders and restore tax exemptions on local inputs under the EFS. Highlighting the inefficiency of the refund process, Khan said the current system of collecting and then reimbursing sales tax leads to liquidity crises due to frequent delays in refunds.
The growing divide within the textile sector reflects deeper tensions over Pakistan’s trade policies, as the country seeks to balance fiscal needs with industrial sustainability.
