LAHORE: After detailed analysis of the federal budget, the trade and industry was stunned by the revenue generation measures adopted by the government and some have already started passing on the impact to consumers.
Cement manufacturers have calculated an impact of Rs15 per 50kg bag due to different revenue measures announced in the budget and all new cement dispatches have this amount added to the price in the invoice.
Ghee millers are mulling increasing the rates by Rs3 to Rs4 per kg. Tariq Sufi, a leading ghee and edible oil producer, said that the custom was demanding 16 per cent GST for clearing imported oil while legally the GST would be levied from July 1.
He said that ghee rates would increase immediately if the government charges GST now, otherwise the rates would be raised according to rise in input costs from July 1.
The prices of all packed food items falling under GST regime would rise. Sugar price is likely to increase by Rs0.50 if the increase is limited to GST only. If other factors like electricity tax were included the increase would be higher.
Leading industrialist Almas Hyder said the budget is anti-industry. He said the cost of production would rise due to measures announced in the budget plus the condition of 35 per cent L/C margin and 2 per cent increase in interest rates announced earlier.
He said though the tax deducted on electricity is refunded, but that is at the end of the year. He said that the 10 per cent electricity tax means that a mill paying Rs2.5 million electricity bill would be blocking cash worth Rs250,000 per month. Additional sales tax and withholding tax would also increase the cost of production, he added.
Some entrepreneurs warn of a spiral increase in prices of almost all items in the next few weeks that would further increase inflation.
They also expressed fears that the local manufacturers might lose market to foreign products as all measures announced in the budget would lead to increase in the production cost of local industries.
Textile was the most disappointed sector after the announcement of the budget. The millers were expecting that the protection granted to PTA would be completely withdrawn. The duty was halved and that on polyester fibre reduced from 6.5 to 4.5 per cent.
The Finance Bill is silent on the R&D support that the government was providing to various export sub-sectors of textiles. They were expecting some concessions but their cash flows have been impacted by various budgetary measures that would squeeze their cash flows. They said 30 per cent increase in minimum wages would further marginalise the industry.
Leading knitwear exporter Sheikh Zafar said that the foreign buyer that has come to Pakistan to place some handsome orders with his company has shown reluctance to increase the per unit price. He said that the buyers in fact now threaten to shift orders from Pakistan to other destinations like Bangladesh or Vietnam if Pakistanis asked for increase in rates.
He hoped that the R&D facility would be continued. He said the facility was missing in the Finance Bill of last year as well but was incorporated afterwards.
Some entrepreneurs said that the policy direction of the new economic team is unclear. They said the industry expects that the present team would continue the past economic policies.
Source: The News, 13/6/2008