APTMA seeks ban on yarn, cloth imports under EFS

ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has called on the government to immediately ban all imports of yarn and cloth under the Export Finance Scheme (EFS), citing severe disadvantages faced by domestic producers.
According to sources speaking to Newzshewz, the Finance Bill for FY25 has removed the sales tax exemption on local inputs under the EFS. While imported materials continue to enjoy duty- and tax-free status, local inputs are now subject to 18% sales tax.
APTMA argues that although this tax is technically refundable, the refund process is slow, inefficient, and costly—particularly impacting small and medium enterprises (SMEs). “Only 60–70% of refunds are processed; the rest are stuck in manual systems, with no meaningful progress in the past 4–5 years,” the Association stated. This has led many exporters to favor imported raw materials, further undermining local suppliers.
The Association pointed out that while textile exports grew by $1.5 billion in FY25, imports of cotton, yarn, and greige cloth surged by $1.6 billion during the same period. This imbalance has contributed to a significant decline in domestic spinning activity.
“Over 100 spinning units have shut down—representing 40% of the industry’s capacity—while those still operating are running at less than 50% capacity and are on the brink of closure. The impact is already beginning to affect downstream sectors,” APTMA warned.
SMEs are particularly vulnerable, as they lack the channels for direct imports and face taxes at every stage, unlike integrated units that can bypass many of these costs. The spinning sector, which is the primary consumer of domestic cotton, is suffering from both policy neglect and declining demand.
APTMA also noted that in the absence of a support price, many cotton farmers are shifting to more water-intensive crops, leading to a further decline in cotton output. Current cotton production has already dropped to a historic low of 5 million bales and is projected to fall even further.
“The cotton economy supports $2–3 billion in rural incomes, especially for women involved in cotton picking. The existing policy framework puts thousands of livelihoods and jobs at risk,” APTMA said.
The Association further warned that Pakistan’s net foreign exchange earnings could be $1.5–2 billion higher if current policies were adjusted to favor domestic producers. It also noted that job losses, a growing trade deficit, and declining tax revenues are becoming critical issues.
Adding to the pressure, the United States has reportedly warned of a possible 29% tariff on all Pakistani exports if the trade imbalance is not addressed. Cotton is Pakistan’s primary import from the U.S., which has expressed willingness to export up to 1.5 million bales to Pakistan. However, APTMA emphasized that unless the domestic spinning industry regains competitiveness, this opportunity cannot be capitalized on.
In conclusion, APTMA has demanded that the government disallow all yarn and cloth imports under the EFS to protect domestic industry and stabilize the textile supply chain.
Ends