FB-2020-21 becomes more crucial, says Irfan Iqbal Sheikh
BY ATTAUL MUJEEB ZEESHAN
Lahore: Federal Budget for the year 2020-21 has become more important in the post-COVID-19 scenario therefore, the government would have to consider pros and cons before announcing and implementing the policies for the next financial year.
While talking to a group of businessmen, LCCI President Irfan Iqbal Sheikh said that Pakistan’s economy is going through a challenging phase due to the outbreak of COVID-19 pandemic.
The most impacted section of our society is Businesses. The manufacturers, traders, retailers, importers/exporters and other segments of the business community are in a distress and facing huge financial losses due to current emergency situation as no business activity is going on in the country.
These extraordinary circumstances require extra-ordinary policy decisions.
He said that In order to improve the cash flow of businesses and inject more liquidity in the economy in this crunch time, the interest payments of the businesses should be deferred for a period of six months.
The LCCI President said that the exemption from the payment of Sales Tax on imported plant, machinery, equipment and components should be granted for Balancing, Modernization and Replacement (BMR) of all existing Industrial units including SMEs.
He said that exorbitant rise in energy rates (electricity and gas) has increased the cost of business for industry and hence dented our competitiveness. The electricity tariff for all the sectors should be reduced to7.5 cents/kwh through the elimination of taxes, in line with the recent decline in global oil prices.
The Gas Tariff should also be reduced for the industry. He said that keeping in view the liquidity situation of the businesses, the Electricity and Gas Bills of all businesses should be deferred for a period of 6months.
Irfan Iqbal Sheikh said that for increasing the investment in this lockdown period and removing the economic distress, the source of income should not be asked on any kind of investment in any sector of the economy for the next 2 years.
He said that all Raw Materials not manufactured locally must attract zero custom duties. Government must eliminate Regulatory Duties (RD) and 2% Additional Custom Duty (AD) on Raw materials so that local industry is able to compete with smuggling and mitigate the effect of low tariff FTAs.
Custom Duties (CD) on intermediary products should be reduced so that our industry is able to import quality materials, components and machinery from the rest of the world at the same duty rate at which it imports through differentFTAs.
He said that the Government should take steps to reduce the interest rate to 5% in line with the regional economies since the high policy rate has made borrowing expensive for the private sector and discouraged investment.
He said that SMEs get only7% of private sector financing. To improve the access to finance for SMEs, the Government must introduce a scheme of interest-free loans for the registered SMEs. The credit limit for registered SMEs should be ten times of their respective electricity bills.
He said that restrictions on the movement of transport are resulting in heavy demurrage charges at the port. Furthermore, the shipping lines are imposing container detention charges. Due to this prevailing situation, the importers have to bear huge financial losses. The instructions to relevant authorities including KPT,PQA and private terminal operators be issued to waive the port demurrage and container detentions charges till May 31, 2020.
Irfan Iqbal Sheikh said that devaluation of more than 30%has taken place since August 2018.This massive devaluation has increased the cost of doing business as many of our industries import vital raw materials and machinery. The government should take steps to strengthen our local currency and mitigate the impact of recent devaluation.
He suggested that to reduce the cost of doing business, the Government should reduce the rate of Withholding Tax. Since most of the Businesses operate on very low-profit margins, this rate of 4.5%should be brought down between 0% and 1% to make sure that businesses do not face liquidity problems.
The Agriculture sector contributes 18.5% to GDP and provides employment to38.5% of the workforce. The growth rate of agriculture, however, remains stifled at 0.85% which is a big stumbling block in our overall economic growth. Crop and Livestock productivity are lower than in other Asian countries.
The Government must take all steps to curtail the trust deficit that is prevalent between the business community and Government.
May ALLAH protect our country