Proposed duty structure for imported partially oriented yarn merits reconsideration
Md. Ashraf Hossain | Friday, 13 June 2008
The government's proposed budget for fiscal 2008-09 is industry-friendly, on the a whole. However, there are some factors that merit reconsideration by the government as well. The reduction of customs duty by two per cent has been proposed for imported capital machinery from current rate of five per cent.
A 3.0 per cent customs-duty reduction on raw materials and semi-processed raw materials has also been proposed from existing 10.0 and 15.0 per cent respectively. About cotton import, zero duty structure will continue in next fiscal year to facilitate production of cotton yarn at low cost, under the proposed budget.
In the present-day world, half of the total yarn is estimated to be produced from natural fibre like cotton, rayon and linen. A quarter of yarn is produced by mixing natural fibre with man-made fibre originating from petrochemicals. One-quarter of yarn is produced from man-made fibre. Draw Texturising Yarn (DTY), popularly called polyester yarn, is made from man-made fibre, that is, from petrochemicals. DTY is produced from partially-oriented yarn (POY), which is imported from abroad. On the basis of the proposed fiscal measures under the new budget, the duty structure under the proposed budget for importing POY is 31 per cent in aggregate -- 12 per cent custom duty, 15 per cent VAT, one per cent, pre-shipment inspection (PSI) charge and three per cent, advance income tax (AIT). But in case of cotton, it is zero per cent. Owing to the recent phenomenonal increase of oil price in the international market, the price of POY has been doubled and it is feared to record further increases. Under the proposed budget, import duty structure is not financially feasible to produce DTY in Bangladesh. Already three factories that used to produce DTY by importing POY, had been closed. The workers and other employees have lost their jobs. The owners of the factories concerned have been facing problems for repaying their bank loans. Their investments in the projects are at stake.
Usually, the poor strata of people in Bangladesh use fabrics made from DTY as because those are low-cost and long-lasting, through not comfortable. But owing to imposition of higher duties on imported POY a few years back, all three factories faced closure. Only if government imposes the same duty structure on POY import as that applicable for cotton import, such closed factories can resume production. In this scenario, the government should reconsider its proposal to impose equal duty structure on import of POY like that on cotton, in order to help increase employment and to ensure the availability of low-cost fabric made from DTY for the poor people in the country.
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The writer is Senior Manager, RM Synthetic Mills Ltd, 8, Panthapath, Dhaka-1215
A 3.0 per cent customs-duty reduction on raw materials and semi-processed raw materials has also been proposed from existing 10.0 and 15.0 per cent respectively. About cotton import, zero duty structure will continue in next fiscal year to facilitate production of cotton yarn at low cost, under the proposed budget.
In the present-day world, half of the total yarn is estimated to be produced from natural fibre like cotton, rayon and linen. A quarter of yarn is produced by mixing natural fibre with man-made fibre originating from petrochemicals. One-quarter of yarn is produced from man-made fibre. Draw Texturising Yarn (DTY), popularly called polyester yarn, is made from man-made fibre, that is, from petrochemicals. DTY is produced from partially-oriented yarn (POY), which is imported from abroad. On the basis of the proposed fiscal measures under the new budget, the duty structure under the proposed budget for importing POY is 31 per cent in aggregate -- 12 per cent custom duty, 15 per cent VAT, one per cent, pre-shipment inspection (PSI) charge and three per cent, advance income tax (AIT). But in case of cotton, it is zero per cent. Owing to the recent phenomenonal increase of oil price in the international market, the price of POY has been doubled and it is feared to record further increases. Under the proposed budget, import duty structure is not financially feasible to produce DTY in Bangladesh. Already three factories that used to produce DTY by importing POY, had been closed. The workers and other employees have lost their jobs. The owners of the factories concerned have been facing problems for repaying their bank loans. Their investments in the projects are at stake.
Usually, the poor strata of people in Bangladesh use fabrics made from DTY as because those are low-cost and long-lasting, through not comfortable. But owing to imposition of higher duties on imported POY a few years back, all three factories faced closure. Only if government imposes the same duty structure on POY import as that applicable for cotton import, such closed factories can resume production. In this scenario, the government should reconsider its proposal to impose equal duty structure on import of POY like that on cotton, in order to help increase employment and to ensure the availability of low-cost fabric made from DTY for the poor people in the country.
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The writer is Senior Manager, RM Synthetic Mills Ltd, 8, Panthapath, Dhaka-1215