At last the government imposed a ban on the export of meat and live animals, but for three months only, to control the price hike in meat and livestock. For a long time now Pakistan Tanners Association was demanding the imposition of a complete ban on export of livestock, wet blue leather including wet blue split leather of all kinds, raw hides and skins and pickled leather from Pakistan to avert the scarcity of raw materials for domestic leather industry. The non-availability of raw skin, hide causes closure of small and medium units that would create unemployment of about 200,000 people, out of the total 500,000 people employed by the industry. Leather industry is contributing 5 per cent in manufacturing sector of GDP.
To comment on the present scenario we have taken an exclusive interview for Pakistan Today of PTA Chairman Southern Zone, Dr Aziz Ahmed. In a spontaneous reply he welcomed the decision and said that although a ban is imposed on the export of live animals but it is only for three months, which should be on a permanent basis and the ban was not levied on export of wet blue leather. He disclosed that about 10,000 live animals per day are being smuggled from the country. The smuggling of live animals according to him, caused a loss of more than Rs7.5 billion to the national exchequer, besides causing huge raw material shortage to the sector not only for the domestic industry but also to meet the export demand of leather products.
Exports
Export of leather and leather items was $1.22 billion in 2007-08, $959 million in 2008-09 and $867 million in 2009-10. These figures he said go on to show that exports have declined in the last 3 years to 30 per cent which is an alarming situation.
He said that exports of 2010-11 have shown an upward trend but this was mainly due to higher prices of leather in the international market while in quantitative terms the increase was negligible.
Quoting UNIDO report, Dr Aziz said, presently due to the exorbitantly high prices of beef and mutton an average Pakistani family can not afford to buy meat and as a result Pakistan was declared as a protein deficient nation.
Dr Aziz said that about 1.5 million animals were perished in 2010 floods and 95,523 animals were exported from July 2010 to March 2011. This resulted in an acute shortage and increased prices of mutton from Rs270 to Rs450 and beef from Rs154 to Rs350 per kg from 2008-09 to 2010-11. He further stated that the ban would help in bridging the demand and supply gap and would bring meat and animal prices down that would make prices affordable for poor people. According to him many projects have been initiated in the country to increase the production of livestock but could not increase number of animal to the desired level, which is also one of the reasons for shortage of animals. This situation has frustrated the tanners so much that they threatened to go to all the four provincial High Courts and Islamabad High Court against export and smuggling of live animals, he added.
Govt to set up Halal Food Certification System
Commenting on the present scenario, Mr Aziz said the Ministry of Commerce has always been in favour of exporting value added products like meat and its products and finished leather goods as the export of live animals affects local meat and leather industry negatively. Therefore, the government is in the process of establishing Halal Food Certification System in Pakistan, which will allow Pakistan to enter in the $600 billion international market.
He pointed out that from 2005 to 2010; the PTA members paid Rs879.253 million as Export Development Surcharge, at the rate of 0.25 per cent, Rs51.20 million as Withholding Tax, at the rate of 1 per cent and about the same amount of Excise Duty, at the same rate. Fifteen per cent flood surcharge as income tax, 2.5 per cent special excise duty and taxes on import of machinery and equipment. The industry also paid 17 per cent Sales Tax and 5 per cent Customs Duty were paid as additional taxes. Due to power and gas load shedding, almost 35 per cent tanneries have set up units in China and Africa. About 40 per cent garments and knitwear units have already moved to Bangladesh, Sri Lanka and other countries. He said we should study models of India, Turkey, China and Bangladesh, because thinking in isolation would be detrimental for our industry.
He cited the example of Indian leather industry development plan with an outlay of IRs191.3 billion to make the industry sustainable and environmental friendly. Pakistan should follow this policy so that we could compete in international market.
He said Environmental Protection Department (EPD) is issuing notices and harassing the industry people, especially SMEs in Punjab that would destroy the whole industrial sector. Giving details of the notices to SMEs he said it was ordered that treatment plants should be installed in every factory which is totally impractical. How can a unit with a total investment of Rs10 to Rs20 million, construct a treatment plant of Rs25 to Rs40 million.
Govt should release Export Investment Support Fund
In this regard, he suggested that the government should release Export Investment Support Fund under STPF-2009-12 for matching grant for setting up of effluent treatment plants and laboratories in individual tanneries.
He further suggested that the EPD should adopt lenient policies like that of India, China, and Bangladesh. However, he agreed with the proposal and said that PTA would develop industrial parks, clusters and set up combined treatment plants in these clusters.
He said that it is the duty of the government to provide infrastructure like combined treatment plants and landfill site, as it is practiced all over the world. Moreover, treatment plants need uninterrupted electricity supply, which is not available in the country, to produce biomass in the tanks to achieve BOD and COD Levels. Moreover, at initial stages, industry may be asked to control air emissions and solid waste only. The implementation of EPA 1997 may be made in various phases with consultation of relevant stakeholders.
He was worried about the load shedding of gas and electricity that has increased the cost of doing business in Pakistan. It has made the industry uncompetitive in the international markets. He said concrete measures would ensure availability of basic raw materials to the leather sector. He demanded that duty free import of 5 per cent of the FOB export value may be allowed for import of spare parts and accessories for leather and its products. They should also be exempted from Sales Tax.
Taxes should be reduced
He suggested that Withholding Tax on export of leather is 1 per cent that should be reduced to 0.5 per cent for at least two years. Further, Export Development Surcharge of 0.25 per cent should also be suspended for at least 3 years.
Moreover, one per cent Excise Duty imposed through SRO 655(I)/2007 on different importable items should be removed he said. Duty on Chromium Sulphate, Formic acid and Fat Liquors, the main raw material of leather industry, should also be reduced.
The chemicals used by the industry should be allowed to be imported from India, as they are cheaper in India as compared to any other country. Therefore, they may be included in the “positive List of Indian items”. Therefore, 6.3 per cent Duty Drawback on export of finished leather should be given so that we can have to some extent a level playing field in competing with India, China and Bangladesh, the chairman said. The Chairman PTA said subsidy for trade delegates should be increased from present level of $100 per day to at least $200 per day. Further, subsidies must also be enhanced from 50 per cent to 75 per cent on space rent and cost of construction for participation in international fairs. The PTA Chairman proposed that the government should formulate a permanent trade policy and set up implementation committee to ensure implementation of all the measures announced in that trade policy.
He demanded that a leather ministry should be established on the pattern of Textile Ministry to enable PTA to take up all the genuine issues with this Ministry for solving problems. The government he said should provide adhoc relief in the shape of additional duty drawback at the rate of 1 per cent of export value to the exporters of leather industry to play their viable role in promoting export.
