Sindh reiterates right to impose VAT on services
By Kalbe Ali
Friday, 07 May, 2010
Speaking at the National Assembly Standing Committee on Finance here on Thursday, Sindh Finance Secretary Dr Fazal Pechuho said that it was the constitutional right of the provinces to impose tax on services.
Responding to Mr Pechuho's comments, FBR Chairman Sohail Ahmed said that if the provinces did not agree on a unified system then the implementation of the VAT would be difficult.
"We were assured by the finance ministry that all provinces will agree on a unified VAT implementation system," Mr Ahmed said, adding otherwise the system will not work.
He said that a political decision was needed in this regard.
"Sindh is the only province to take up its constitutional right, while the other provinces have allowed the FBR to collect VAT on services and the board would deduct one per cent as service charge from the actual amount," Mr Sohail explained.
Meanwhile, the committee was informed by Aftab Shaban Mirani that Sindh Chief Minister Qaim Ali Shah, who is also the finance minister of the province, had said that Sindh would not back off from its constitutional right.
Talking to media after the meeting Dr Fazal Pechuho said that Sindh had established a department 'Sindh Revenue Services' (SRS) for collection of VAT on services.
Mr Pechuho said Sindh wanted to collect VAT on services as the province was contributing over 40 per cent of total GST collection on services sector, but under the existing NFC distribution formula the province would only get around 20 per cent based on the population of the province.
Meeting convened
Meanwhile, President Asif Ali Zardari on Thursday called Syed Qaim Ali Shah for discussion over the matter on Friday (today) and a political solution was expected.
Sindh had also protested over the move of finance ministry where the key clauses of the NFC award have been deleted and the distribution formula was based on population basis only.
The new summary of the NFC award had been forwarded to the president by the PM Secretariat and its Presidential assent was also expected on Friday.
An official of Sindh Revenue Services told Dawn that the Sindh was expected to transfer its right to collect VAT on services to FBR after the original NFC is approved as it would increase Sindh's share in divisible pool.
Earlier speaking at standing committee meeting, the FBR chairman said that a handful of elements were creating an impression that VAT would increase inflation.
"Those who want to take undue advantage by increasing prices are wrongly propagating about huge inflationary impact of VAT," he said.
He added that the negative reaction from certain quarters on VAT was only due to lack of understanding of the VAT being levied on the supply chain and at consumption stage. "This has created confusion and misunderstanding about the VAT which would replace sales tax at a lower rate.
The committee chaired by Fauzia Wahab was also briefed by tax expert Shabbar Zaidi and President Pakistan Tax Bar Association Abdul Qadir Memon.
Mr Shabbar said that the hue and cry over VAT was only because it was the first tax being implemented through the parliament all other taxes had been passed through the finance bill.
However, he said that the major amendment needed in VAT was exemption on all food items and the items consumed by lower and middle class basket.
Reserves rise to $15.04bn
Friday, 07 May, 2010
Reserves held by the State Bank of Pakistan (SBP) rose to $11.18 billion from $11.06 billion a week earlier, while those held by commercial banks eased to $3.86 billion from $3.92 billion, said the SBP's chief spokesman, Syed Wasimuddin.
"This includes $188 million received from the
The
The $468 million would be reflected in next week's foreign exchange reserve data, said Wasimuddin.
Reserves hit a record high of $16.5 billion in October 2007 but fell steadily to $6.6 billion by November 2008, largely because of a soaring import bill.
An IMF emergency loan package of $7.6 billion agreed to in November 2008 helped avert a balance of payments crisis and shore up reserves.
The IMF increased the loan to $11.3 billion in July and the central bank received a fourth tranche of $1.2 billion on Dec 28.
The IMF board is expected to meet in mid-May to discuss the approval of the delayed fifth tranche of about $1.2 billion.—Reuters
Trading gets slow on price bargains
By Our Staff Reporter
Friday, 07 May, 2010
Some of the ginners holding stray lots to sell them at the higher levels were, however, a bit jittery and sold at lower rates in line with the spinners, who were also sellers around and below Rs6,600.
But with an unsold stock of 66,000 bales and that, too, of fine quality, ginners are still in commanding position and are in no mood to lower their asking prices, floor brokers said.
They said ginners are still eyeing the price level of Rs7,000 per maund but spinners and mills appear to be so far in no obliging mood and are not inclined to resist the overture at least for the near-term.
However, as the textile sector is still far behind its annual lint consumption needs may, in the final analysis, oblige ginners, they added.
Meanwhile, spinners and mills are said to be on a big shopping list to fill in the supply gaps as no one among them would like to miss their export commitments of cotton yarn and cloth, market sources said.
New York cotton futures recovered from the overnight lower levels on active short-covering and were quoted higher by 0.79 cents per lb for both the maturing May and the ruling July contracts at 80.38 and 82.08 cents, respectively.Official spot rates on the other hand remained pegged at the last levels of Rs6,700 per maund in the absence of buying support.
Ready off-take was light totaling 400 bales as under: 400 bales, mill-to-mill at Rs6,600 and 200 bales, Vehari at 6,700.
Inflationary impact of VAT to be 1-1.5 percent: FBR chief
SOHAIL SARFRAZ
ISLAMABAD (May 07 2010): Chairman, Federal Board of Revenue (FBR), Sohail Ahmed, has said that inflationary impact of Value Added Tax (VAT) would not be more than 1-1.5 percent, but certain unscrupulous elements are propagating sharp hike in prices of goods to create artificial inflation after introduction of the VAT from July 1, 2010.
After the conclusion of the National Assembly Standing Committee on Finance meeting here on Thursday, he told media that some elements wanted undue increase in prices by wrongly propagating huge inflationary impact of the VAT. A hype is being deliberately created to misguide the general public that VAT would suddenly raise prices of all consumer goods.
This is absolutely wrong perception that the VAT would have any huge inflationary impact. The negative reaction from certain quarters on VAT is only due to lack of understanding of the VAT being levied on the supply chain and at consumption stage. This has created confusion and misunderstanding about the VAT which would replace sales tax at a lower rate, he said.
The exact impact would soon be available on the basis of independent findings of Pakistan Institute of Development Economics (PIDE). However, the inflationary impact of the VAT would not be more than 1-1.5 percent, he asserted.
Over 90 percent of the sales tax has only been paid by 1,300 to 1,400 taxpayers, reflecting pathetic attitude of the undocumented sectors. If taxpayers are honestly ready to pay their taxes, the tax department has no problem with business and trade.
National Assembly Standing Committee on Finance chaired by MNA Fauzia Wahab patiently heard the viewpoint of all stakeholders despite resistance from opposition members. During the committee's proceedings, Sohail Ahmed categorically said, "If any province refuse to accept integrated VAT, I will myself advice the federal government to kill this law.
We have been given understanding that the provinces would pass the broad-based integrated VAT on goods and services. The FBR has drafted five laws in view of assumption that all provinces would authorise the FBR to collect sales tax on services", he added.
He said that even if one province is not ready to accept the VAT and authorise the FBR to collect VAT on services, the new system of VAT could not be implemented. The FBR is a technical department and Ministry of Finance or the federal government can take up the issue with the provincial governments for introduction of an integrated VAT. The FBR has no legal authority to force any province to adopt Federal/Provincial VAT Bills. The federal government has given understanding to the FBR that the provinces would be on board on the issue of integrated VAT, he told the committee.
He was confident that some understanding to develop harmony is on the cards at the political level on the issue of VAT for introducing an integrated VAT. The federal government is resolving the issues at the political level for implementation of an integrated VAT, he added.
Sohail Ahmed without any hesitation shared with the committee that historically federations and chambers have promised to voluntarily increase revenue collection and broaden the tax net, but these promises have never been met. Despite lucrative fixed tax schemes and low rate procedures, they have never fulfilled their promises and these bodies have not played any role in assisting the FBR to increase collection or broaden the tax net.
Even not a single penny has been contributed by such chambers, which is unfortunate. When some of the representatives of chambers requested for deferment of VAT, FBR Chairman responded that why don't you make
Tax experts and chartered accountants informed the meeting that the proposed amendment in the Federal VAT Act to allow un-registered buyers for not disclosing their identity (NTN/CNIC) on payment of 3 percent additional tax is against the documentation under the VAT.
The representative of Federation of Chamber of Commerce and Industry (FPCCI) observed that it is a regressive tax and inflation would definitely go up after enforcement of the VAT. There would be around 10-15 percent inflationary impact of VAT enforcement from next fiscal. The cost of doing business would tremendously increase after implementation of the VAT, the argued.
Some of the representatives of chambers and federations present in the meeting mainly expressed their concern over the inflationary impact of the VAT based on their own calculations. In all such cases, representatives of zero-rated sectors and trade bodies wanted to retain exemptions and zero-ratings. Other associations requested the committee to defer VAT implementation for one year period.
They assured the FBR that the concerned trade bodies and federations are ready to generate additional revenue without imposition of VAT under the existing sales tax arrangement. The second major concern of the business community was timely payment of refunds under the Expeditious Refund System of the VAT. Thirdly, most of business associations objected that the FBR has not consulted the business and trade during drafting of the VAT process.
The representatives of dairy sector were of the view that there would be guaranteed inflation after introduction of the VAT. Zero-rating on dairy sector should continue, otherwise, 30-40 percent sales would come down. They claimed that 10-12 percent inflation would definitely take place due to VAT implementation.
The representative of
Traders informed the committee that prices of poultry items would witness a jump of at least 30 percent in case exemption on poultry feed is withdrawn under the VAT. Some of the business units objected that the FBR scheme of "risky" taxpayers is creating serious problems for the business community. "If my supplier has been declared as "risky", I will also be considered as risky taxpayer", a business representative pointed out.
Certain chambers and federations asked the FBR to defer VAT for a period of one year. To several questions, Syed Muhammad Shabbar Zaidi member Revenue Advisory Council clarified that the VAT would replace the sales tax and any kind of new tax is not being levied.
Abdul Qadir Memon of Pakistan Tax Bar Association observed that the VAT would definitely have some inflationary impact. Most of the items consumed by the poor people have already been exempted from the VAT. The FBR has estimated to collect around Rs 100 billion from goods and services. If around Rs 100 billion has to be generated, it may have impact on the consumers. Presently 23 items are subjected to sales tax which may be brought into the VAT regime.
He pointed that there are serious legal issues, which have been witnessed in countries where integrated VAT on goods and services has not been implemented. Kashif Shabbir, President Rawalpindi Chamber of Commerce and Industry (RCCI), highlighted ground realties of business and trade and their difficulties to operate under the VAT regime.
Copyright Business Recorder, 2010
Centre, Sindh meeting on VAT today
RECORDER REPORT
ISLAMABAD (May 07 2010): The federal government and Sindh province would convene an important meeting here on Friday (today) to resolve the Value Added Tax (VAT) dispute to finalise collection methodology of VAT on services. It is learnt here on Thursday that President Zardari has called Chief Minister Sindh Syed Qaim Ali Shah for discussion on Friday (today) and a politically viable decision is expected on VAT.
It is expected that revised Presidential Order on 7th National Finance Commission Award would be issued with inclusion of revenue distribution criteria between provinces and GST on services as provincial right to remove the concerns of the
Sindh province has expressed its firm resolve to levy and collect VAT on services by itself from next fiscal. Tax authorities of the Federal Board of Revenue (FBR) have repeatedly informed the National Assembly Standing Committee on Finance that it would be impossible to implement VAT till Sindh allow the FBR to collect VAT on services.
Speaking at the National Assembly Standing Committee on Finance, here on Thursday, Finance Secretary Sindh Dr Fazal Pechuho once again categorically said that it is the constitutional right of the provinces to impose tax on services. Responding to a query, Chairman FBR Sohail Ahmed said that if the provinces did not agree for a unified system of VAT than it would not be possible to implement this tax in an integrated form.
"We were assured by the finance ministry that all provinces will agree for a unified implementation system," Ahmed said, adding Sindh is the most important province, which has to be part of the integrated VAT regime "otherwise the system will not work."
He said that a political decision was needed in this regard. Sindh was the only province to take up its constitutional right, while the other provinces have allowed Federal Board of Revenue (FBR) to collect GST on services and the FBR would deduct 1 percent as service charge from the actual amount.
Meanwhile, the committee was informed by Aftab Shaban Mirani that the chief minister of Sindh has told him that Sindh would not back off from its constitutional right. Dr Pechuho informed the committee that the
Later talking to media, Secretary Finance Sindh Dr Fazal Pechuho, said that Sindh has established a department 'Sindh Revenue Services' (SRS) for collection of VAT on services. Initially Sindh plans to collect VAT on telecom sector at calls originating from Sindh, banking and the insurance sector. He said Sindh wanted to collect VAT on services as the province was the major contributor of total GST collected on service sector, but the FBR distributions to the provinces is based on previous NFC distribution that was on population basis.
The contributions made by Sindh in the overall service sector accounts to over 40 percent in the national collection but under the existing distributions formula Sindh would only get around 20 percent based on the population of the province. The new summary of the NFC award has been forwarded to the President by the PM's secretariat and its Presidential assent is also expected on Friday (today).
He added that if the federal government wanted to impose and collect VAT on goods and services by itself that it would be required to amend the constitution of the country as well as amendment in 7th National Finance Commission Award. In this regard he proposed that a Mini-NFC meeting could be convened for the decision.
Copyright Business Recorder, 2010
VAT regime: exporters must submit declaration to ensure consumption of inputs
RECORDER REPORT
ISLAMABAD (May 07 2010): The Federal Board of Revenue (FBR) will make it mandatory for the exporters to submit a declaration under the new Value Added Tax (VAT) regime to ensure consumption of inputs/raw materials in manufacturing of finished products. Abrar Ahmed Khan FBR Member Sales Tax informed the National Assembly Standing Committee on Finance on Thursday that the declaration of exporter would be obtained while issuance of refund cheque to the exporter.
The post-refund audit would verify the consumption of these inputs in the finished products being exported under the new system. FBR Member Sales Tax observed that the business of fake/flying invoices would be ended under the Expeditious Refund System due to electronic processing of documents. In the past, there were cases where fraudulent refunds were issued on fake invoices in connivance with the department due to manual system.
However, the particulars of buyers would be matched with the help of data available with the manufacturers. The new system would be subject to post-refund audit and 'active taxpayers' doing business with compliant suppliers would face no problem in obtaining VAT refund under the new system. One of the key parameters for payment of Value Added Tax (VAT) refund under the Expeditious Refund System is the previously registered taxpayers with good profiles will have edge on the newly registered persons from July 1, 2010.
Sharing broader parameters of refund payment under the Expeditious Refund System, Imtiaz Ahmed Khan General Manager Pakistan Revenue Automation Limited (PRAL) informed the National Assembly Standing Committee on Finance that the 'registration age' of the taxpayer would be an important parameter for refund payment where newly registered persons may be more "risky" as compared to already registered with reliable tax profiles.
Different criteria would be applicable for newly registered persons and those already registered and compliant taxpayers for the last many years. The regular return filers (active taxpayer) would be given top priority for payment of refunds. Other parameters included registration age, Output/Input Ratio, risky suppliers and auto cross matching of purchases and sales.
He said manufacturers-cum-exporters would be able to get refund only within 10 days after carrying out risk assessment and auto-approval by the system. The expeditious refund process cover three stages including electronic refund filing, risk assessment & auto approval and cheque printing and dispatch process. During presentation FBR Chairman Sohail Ahmed pointed out that so far an amount of nearly Rs 61 billion has been paid as sales tax refund during 2009-10.
However, refund would also be paid in the remaining three months of the current fiscal year. During 2008-09, the board paid refund of Rs 70 billion as compared to Rs 60 billion in 2007-08. The FBR Charmin gave assurance to the committee that the taxpayers having good past record would be promptly paid refund without any manual processes under the risk-based assessment system.
The risk free record of taxpayers would form basis for payment of expeditious refund ass compared to risky taxpayers. Commenting on the Expeditious Refund System, Shabbar Zaidi, a leading chartered accountant, said it is not a perfect system, but it is a good start for introducing a paperless system under the VAT regime.
Copyright Business Recorder, 2010
See 38 of Sales Tax Act, 1990: officials can exercise powers after prior approval of FBR
RECORDER REPORT
ISLAMABAD (May 07 2010): Directorate General of Intelligence and Investigation Federal Board of Revenue (FBR) has clarified that the officials of the directorate can only exercise powers of section 38 of the Sales Tax Act, 1990 after obtaining prior approval of the board.
Commenting on the amended SRO 56(I)/2010, senior tax officials told Business Recorder here on Thursday that the powers of section 38 have already been exercised by the directorate after obtaining prior approval of the Board, on case to case basis. The recent notification has only been issued to remove ambiguity regarding exercise of powers conferred by section 38 by DG I&I - FBR.
Officials further clarified that the officers of DG I&I - FBR are empowered, under FBR's notification SRO 56(I)/2010, dated 02-02-2010, to exercise powers of Inland Revenue Officers provided under section 25, 25A, 25AA, 37, 37A, 37, 38A, 38B, 40, 45B, 46 and 47 of the Sales Tax Act, 1990. The DG I&I - FBR investigates and conduct audits, under the above mentioned provisions of law, in cases of tax fraud. As regards powers of section 38 of the Sales Tax Act, 1990 whereby an officer of Inland Revenue is authorised to have access to premises, stocks, accounts and records of a sales tax registered person, DG I&I has already been exercising these powers, with prior approval of the Board, on case to case basis.
Even after issuance of SRO 282(I)/2010, dated 29-04-2010 DG I&I will not be able to exercise powers of section 38 of the Sales Tax Act, 1990 without prior approval of the Board. It is pertinent to mention that powers of section 38 are exercised where a taxpayer does not cooperate in providing information and producing record for an investigation or audit. SRO 282(I)/2010 has inserted section 38 of the Sales Tax Act, 1990 in SRO 56(I)/2010only to clarify the ambiguity regarding exercise of powers conferred by section 38 by DG I&I - FBR, officials added.
Copyright Business Recorder, 2010
Five leading zero-rated export sectors: FBR hails proposal to levy five percent VAT initially
RECORDER REPORT
ISLAMABAD (May 07 2010): The Federal Board of Revenue has highly appreciated a budgetary proposal of Syed Muhammad Shabbar Zaidi Member Revenue Advisory Council to initially levy a reduced rate of 5 percent Value Added Tax on five leading zero-rated export sectors from 2010-11.
In an impressive presentation before the National Assembly Standing Committee on Finance, Karachi-based leading chartered accountant explained rationale behind VAT implementation to the business and trade gathered from across the country.
He told the committee that one of the solutions for the export-oriented sectors is to create a 'risk-free' refund system by July 1, 2010. This risk free system, monitored by independent body, would have the support of business community. In order to reduce the risk of non-genuine refunds and a possible haemorrhage of revenue such five sectors be taxed at the rate of 5 per cent for an interim period to be brought at par with the normal VAT rate within next three years. Exports to remain zero-rated under the VAT regime.
He explained that one of the major problems in VAT implementation is the availability of smuggled goods without invoices at distributors, wholesalers and retailers. The main issue for the distributors, wholesalers and retailers is the availability and trade in the goods originating from non-documented sector being Afghan Transit Trade Products, smuggled products, under invoiced products and goods originating from un-recognised manufacturing sector.
The shops are full with the smuggled goods without valid documentation. This would create serious problems in VAT implementation to show documentation of the smuggled goods being sold in posh markets and business centers. The extension of VAT net to these segments will only be effective if there is gradual curtailment of the said evils. However, the implementation of VAT is a correct step towards that as it would bring such issues at forefront and lead to effective solution.
He further stated that the VAT in principle is levied to bring all segment of business into the tax net. At present, trade sectors including distributors and wholesalers and retailers are effectively not in tax net. This law proposes to remove the present 'Third Schedule' (being a distortion). Under this schedule 'manufacturers' are taxed at the end price (Retail price) in principle for the reason that subsequent sectors are not within the tax net.
Nevertheless, in order to bring a gradual change without disturbing the system, minimum threshold for taxable entities has been increased to turnover exceeding Rs 7.5 million per year as against Rs 5 million per year. This threshold of Rs 7.5 million would be gradually brought down with the passage of time.
During his presentation, Zaidi highlighted that the VAT Bill is to be implemented as it is the right step towards documentation and sustainable growth in taxation system. There is no need to delay the implementation. The misperception in the mind of common man be removed. It has to be property conveyed that this is good step for economic development of
The essential items of daily use and for low and middle income group to remain outside the tax net. The issue of Taxability of Services by the Provinces be settled. If any Province or Provinces intends to tax services themselves then let the present draft be appropriately amended. Five export-oriented sectors be examined in depth and practical solution for avoiding the risks be introduced.
He specifically mentioned that the problems of Afghan Transit Trade, under invoicing, smuggling and undocumented manufacturing sector be sorted out, in order to resolve the issue for distributors, wholesalers of retailers. Sharing the inflationary impact, he said that the total expected collection for 2010-11 is only Rs 50 to 60 billion from the VAT as against perceived collection of Rs 600 million.
The essential food items, education to poor, life saving drugs and all items of consumption basket of low-income group are to be exempt from VAT. In principle, implementation of VAT leads to documentation, which ultimately support proper management of economics.
Revenue Advisory Council of Federal Board of Revenue has assigned the exercise to determine the inflationary impact, if any, of the introduction of VAT to two relevant independent bodies, Pakistan Institute of Development Economic (PIDE) and
Notwithstanding the views that will be submitted by the aforesaid relevant bodies, inflationary effect is being over exaggerated and there is lot of misperception on the matter. In real sense, the effect may be anti-inflationary, as the rate proposed is 15 percent for all goods and services as against 16 percent at present [with even higher rate for others].
It is extremely essential that schedules of 'zero rating' and 'exemptions' be examined with reference to economic effect to ensure that 'common man' of
The biggest distortion created in VAT system in
Firstly, non-genuine refunds were issued and genuine export refunds were struck up. It transpired that refunds issued exceeded actual tax collection. Furthermore, it resulted in growth of non-genuine commercial exporters and affected the organised and documented industry.
Nevertheless, this way only a 'stopgap arrangement' and at some time this distortion has to be removed. The question is whether sufficient safeguards have been introduced that deficiencies felt at that time have been satisfactorily removed, Shabbar Zaidi added.
Copyright Business Recorder, 2010
NEW YORK (May 07 2010): Cotton futures finished Thursday at a 3-1/2 week low as risk aversion sales spawned by the Greece debt crisis and stop-loss automatic chart pressure hammered fibre contracts, analysts said. The benchmark July cotton contract dropped 2.23 cents to finish at 79.85 cents per lb, trading from 79.80 to 82.50 cents.
Based on the second position daily charts, it was the lowest close for cotton since the middle of April. Volume traded in the July contract stood at a sizeable 15,139 lots at 3:12 pm EDT (1912 GMT). New-crop December fell 1.79 cents to end at 75.51 cents, ranging from 75.27 to 77.40 cents. "Cotton cannot stand on its own feet with weak technicals and lower outside markets," said Mike Stevens, an analyst for brokers SFS Futures in
Cotton, which is particularly sensitive to the movement of outside markets, posted increased losses especially when key July slipped below 80 cents, dealers said.
The US Agriculture Department's weekly export sales data showed total US cotton sales at 285,200 running bales (RBs, 500-lbs each), against sales in last week's report of 214,800 RBs and trade belief it would range from 225,000 to 300,000 RBs.
US cotton export shipments hit 226,200 RBs versus last week's 285,300 RBs. Brokers Flanagan Trading Corp sees support in the July contract at 79.60 and 78.75 cents, with resistance at 80.50 and 81.35 cents. Volume traded Wednesday reached 23,309 lots, against the previous tally of 24,669 lots, according to ICE Futures US. Open interest in the cotton market was at 179,943 lots as of May 5, from the prior 184,165 lots, the exchange said.
Prices ease a bit in thin activity on cotton market
RECORDER REPORT
Some experts said that mills are still hoping that in case demand falls the rates may come down in the coming days. Many reports appeared during last days indicating that several countries were mulling to increase cotton production to bring down prices. Recently locally and globally, the rates have touched the all-time high. A top industry official said that
But cotton output remains just over half its level before war divided the nation. Kouadio N'Guetta, executive secretary of the cotton growers' association, told Reuters that high prices had attracted tens of thousands more farmers to the crop since the 2009/10 season finished with 200,000 tonnes of cotton produced. "Our forecast for the next season currently ranges from 220,000 to 250,000 tonnes," N'Guetta said.
Cotton futures closed firmer on Wednesday on suspected trade/consumer buying as fibre contracts recovered from a two-week low set in the previous session and lingering concern over
Volume traded in the July contract stood at a sizeable 16,610 lots at 2:30 pm EDT (1730 GMT). New-crop December rose 0.22 cent to end at 77.30 cents, ranging from 76.15 to 77.42 cents. The following deals were reported : 400 bales of cotton (mill to mill) done at Rs 6600 and 200 bales from Vehari at Rs 6700.
Copyright Business Recorder, 2010
Cotton prices slump due to uncertainty
DR ZAFAR HASSAN
LAHORE (May 07 2010): Due to uncertainty prevailing in the textile industry regarding any restrictive outcome pertaining to yarn exports which matter is still under the consideration of the government, raw cotton prices fell nearly Rs 200 per maund (37.32 kgs) over the past couple of days in the ready local market.
In any case, according to the Pakistan Cotton Ginners Association (PCGA) seedcotton arrivals receipt till the 1st of May 2010 pertaining to the current crop (2009-2010), were an insignificant amount of 65,896 domestic size bales of unsold lint still lying unsold with the ginners.
The PCGA arrivals reports puts the total arrivals till the beginning of this month for the current season (August 2009-July 2010) at 12,693,268 bales with hardly any additional quantities to follow. From this total, domestic mills are shown to have lifted 11,831,724 running bales, while the exporters picked up 795,648 bales. For all practical purposes, the current cotton season has packed up with meager numbers of disposable cotton left with the ginners.
Now the attention of the cotton trade and industry is shifting to the forthcoming season (2010-2011). Dull domestic yarn prices and subdued condition of cotton prices have resulted in lack of interest in the domestic cotton market. However, several mills have been active in import of cotton with considerable bookings in hand so that there appears to be no panic regarding any immediate escalation of lint prices.
Nominal arrivals of new crop (2010-2011) are variously expected to begin as early as or May, or in some assessments by the middle of June 2010, but it is clear that commercial quantities of new crop cotton will only arrive in July 2010 and thereafter.
The projected output for the forthcoming crop (2010-2011) according to current reckoning is between thirteen to 13.5 million domestic size bales with consumption estimated at about 15.5 million bales. Higher consumption could be possible but lack of adequate power supply and paucity of cotton availability from the domestic cotton output would reduce the mills take up accordingly.
Unlike the previous weeks, now water availability for cotton areas has increased appreciably so that new crop requirements of water are likely to be met fairly adequately. Whatever the difficulties, the textile industry is likely to cross over to the new season with either more imports, besides those in the pipeline, and sharing of cotton use by sales between the mills themselves. However, the switchover to the new crop will have its pains and problems with several units having to close or curtail their spinning capacity for at least a couple of months.
The nominal price of seedcotton (kapas/phutti) could be conceived to be in the range of Rs 2,500 to Rs 2,600 per 40 kgs in both Sindh and
International cotton futures prices may have receded two or three cents per pound in recent sessions due to the tragedy in
According to Mian Shahzad Ahmad, acting chairman of the All Pakistan Textile Mills Association (APTMA), a total of three million bales need to be imported this season (2009-2010) to meet the cotton shortfall in
Shahzad Ahmad lamented that lack of timely government policies and unnecessary interference of the government in free trade is very detrimental and counterproductive to the well being of the overall economy and all the stakeholders including the cotton growers and the value-added sector. Shahzad Ahmad said recently that if the mills have to import their cotton short fall of nearly 20 percent every year at costly international prices, why the value-added sector cannot do the same. He lamented the fixing of yarn export ceiling at a low level of 35,000 kilogrammes per month.
Despite all the brouhaha in the global equity markets over the past eighteen months or so, the financial and economic meltdown in
There are also inklings that not only has Greek government fudged their account books, but has been adopting profligate practices over the past two or three decades. It is feared that some other countries in Europe are no better and have similar problems like
The European Central Bank was meeting on Thursday to discuss how to save the Euro as it continued to tumble following the Greek financial and economic fiasco. It appears that Greek society is on its tether and veering towards an implosion which could cast its deadly waves around the globe.
The trouble with global economic and financial system under the current model is that solid economic growth has been amply replaced by financial shenanigans, property speculation and other instruments of hedge and derivatives which make no substantial contribution to real or solid economic progress. Then there are the likes of Goldman Sachs who are being charged with impropriety in their dealings. To top it all, now the mortgage giant Freddie Mac has reportedly asked for another bailout of US Dollars 10.6 billions to offset its quarterly losses. Concludingly, it is estimated that 60,000 businesses could go bust in
Copyright Business Recorder, 2010
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| Value-Added Textile Forum announces strike on 11th |
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| UN report on Economics and Social Survey of Asia Pacific |
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| Govt should reduce fiscal deficit to 4pc in 2010/11: former adviser |
| Performance report 2008/10 |
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| Govt shores up sustainable economic growth |
| Cotton market remains dull |
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| Friday, May 07, 2010 |
UN report forecasts 3.2pc growth in Pak
Published: May 07, 2010
The survey, an annual publication of Economic and Social Commission on Asia and Pacific (ESCAP) was launched on Thursday in different countries including in
The report said that
The survey report has projected country's inflation at 12 per cent during the current financial year against the inflation of 20.8 percent last year and 12 percent in 2007-08, showing a large decrease as compared to the inflation last year.
Regarding savings and investments, ESCAP has forecasted country's gross savings growth at 15.1 percent against 14.4 percent in 2008-09 and 13.4 percent in 2007-08.
On the other hand, the gross investments would grow at 18.5 percent during the year against 19.8 during last year and 21.6 percent during 2007-08, it predicted.
The survey said that
The industry, especially large-scale manufacturing suffered the worst due to drop in international demand while also having to cope with acute shortages of electricity.
Improved performance of the service sector offset it to some extent which grew 3.6 percent during the year, it said adding that a rebound was witnessed in agriculture due to bumper wheat crop.
The report says that anticipated recovery is expected to be supported by the restocking of inventories and a small recovery in exports as the incipient recovery in major economies gather pace.
The large-scale manufacturing sector, which contracted in 2009 is projected to register positive growth during this year.
The report says that
Country facing 2,238MW power shortfall
Published: May 07, 2010
The Hydel generation stood at 4,025 MW, WAPDA Termal 2,569 MW, IPPs 5077 MW and the PEPCO's export to KESC was 680 MW, according to figures issued by the Ministry of Water and Power on Thursday.
Planning Commission report reveals that
A pilot project of 100 MW will start generation from thar coal field in the first phase shortly. Thar coal power is likely to cost Rs. 3.90 per unit.
The first PRR with a capacity of 150 MW set up in
The government has signed an MOU with
The loan funds will be used for civil work, equipments procurement, construction and expansion of substations, extension of transmission lines. This would help eliminate forced outages.
President Zardari has inaugurated first gas fired RPP of 51MW in Naudero on April 4, 2010 which is a private sector investment by Walter's Power International (WPI). The said RPP shall have an additiaonal generation capacity of 50 MW within the year thus bringing the total to 101MW.
Some of the IPPs and RPPs that are likely to add more power generation during 2010 include Karkey Rental, Reshama Rental. Saif Power, Engro Power Bhikki Power, Hubco Narowal,
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