Budget 2012-13 Boolet Title Cover · pro poor cons s af l sidhe n in o era tt i forth com ing...

Budget Proposals2012-13

Research & PublicationsInstitute of Cost and Management Accountants of Pakistan

Head Office: ICMAP Building, ST-18/C, ICMAP Avenue, Block-6, Gulshan- e- Iqbal, Karachi- 75300, Paki stan.

Tel: 92-21-99243900 Fax: 92-21-99243342; Email: [email protected], Website: www.icmap.com.pk

Submitted to:Min is try of Fi nance, Gov ern ment of Paki stan &

Fed eral Board of Reve nue___________________________________________

Copy En dorsed to: All Fed eral and Pro vin cial Min is ters

All Par lia men tari ans Head of Chambers, Trade Bodies and Associations

ForewordThe Institute of Cost & Management Accountants of Pakistan is actively involved in dealing with the matters of nationaland international importance by organising seminars, workshops and conferences. It has been the tradition of theInstitute to take lead in addressing these issues by inviting experts and professionals to deliberate and formulatesuggestions and proposals, for consideration by the concerned authorities and organisations.

ICMAP has al ways played an im por tant role as neu tral fa cili ta tor in the budget- making pro cess. During the past, itor gan ized sev eral Pre- Budget semi nars, and in vited heads and rep re sen ta tives of FPCCI, KCCI, LCCI, FCCI, MCCI,SCCI, QCCI, ICCI and trade as so cia tions, cor po rate lead ers, sen ior ex ecu tives and decision- makers, to make theirpro pos als for con sid era tion in the forth com ing budget.

It gives us great pleas ure to sub mit con soli dated in dus try wise sum mary and de tails of the pro pos als. The In sti tute hasmo bi lized its mem bers’ re sources serv ing in al most all in dus tries to get budget and eco nomic pro pos als.

Re cent global fi nan cial cri sis and ex tremely vul ner able se cu rity en vi ron ment added risks to the econ omy. The sum up ofthe budget pro posal is as fol lows:

Cost ef fi ciency for eco nomic stabilityFriendly tax sys tem; IT- enabled gov ern ment de part ments; Cor po ra ti za tion of pub li c sec tor or gani za tion; De vel op ment of two mega cit ies in Sindh and Pun jab; Ef fec tive role of NFC to dis trib ute funds to the prov inces; Pro vin cial / lo cal auton omy;

It would be highly ap pre ci ated if Gov ern ment of Paki stan gives se ri ous con sid era tion to the budget pro pos als andsug ges tions. We would also wel come an op por tu nity for fur ther in ter ac tion with the Min is try of Fi nance and Fed eralBoard of Reve nue for fur ther de lib era tions and clari fi ca tions of the pro pos als.

ICMAP re mains com mit ted to its mis sion to con trib ute to the eco nomic and in dus trial growth of the coun try.

ICMAP places on record its appreciation for the valuable contribution made by its members in the formulation of thesePre-Budget Proposals.

Shahzad Ah mad Awan, FCMA Zia-ul-Mustafa, FCMAChair man PresidentRe search & Pub li ca tions Com mit tee

ICMAP Re search & Pub li ca tions

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Re search & Pub li ca tions Com mit tee

Chair man:Mr. Shahzad Ah mad Awan, FCMA

Mem bers:Mr. Mo ham mad Ha nif, FCMAMr. Na zir Ah med Sha heen, FCMAMr. Aamer Ijaz Khan, ACMAMr. Mo ham mad Iqbal Ghori, FCMAMr. Mo ham med Amir Za heer, FCMAMr. Ather Azim Khan, FCMAMr. Ma sood ul Has san, FCMAMr. Saqib Ma sood, ACMAMr. Am jad Iqbal, ACMAMr. Furqan Meh mood, ACMA

ICMAP Research & Publications

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Pro pos als

ICMAP - Gov ern ment Part ner ship Fo cus ing on “Cost Ef fi ciency for Eco nomic Sta bil ity”..............6

Manu fac tur ing Sec tor

– En ergy and Power............................................................................................................................10

– Tex tile...............................................................................................................................................14

– Ce ment.............................................................................................................................................16

– Oil & Gas ..........................................................................................................................................17

– Pe tro leum .........................................................................................................................................18

– Phar ma ceu ti cal.................................................................................................................................21

– Leather .............................................................................................................................................24

– Sugar................................................................................................................................................25

Serv ices Sec tor

– Tele com mu ni ca tion ..........................................................................................................................26

– In for ma tion Tech nol ogy....................................................................................................................29

– Edu ca tion .........................................................................................................................................30

– Con struc tion .....................................................................................................................................33

– Ho tel & Tour ism................................................................................................................................35

Fi nan cial Sec tor

– Bank ing ............................................................................................................................................36

– Capi tal Mar kets ................................................................................................................................38

Ag ri cul ture

– Crops Pro duc tion, Ir ri ga tion, Land Re forms, Tech nol ogy ................................................................39

Taxa tion..................................................................................................................................................41


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ICMAP - Government Partnership Fo cus ing on“Cost Ef fi ciency for Eco nomic Sta bil ity”

How the “Man age ment Ac count ants” can help the Gov ern ment in Achiev ing Eco nomic Sta bil ity, Cost Ef fi ciency, Bet terUtili za tion of Pub li c Funds, Re vival of In ef fi cient Or gani za tions, Check ing In fla tion and Un fair Busi ness Prac tices

The ‘Ma nag ement Ac count ants’ can play a very sig nifi cant and vi tal role in sup ple ment ing the ef forts of the gov ern mentin achiev ing eco nomic sta bil ity and cost ef fi ciency, bet ter utili za tion of pub li c funds and re sources, re viv ing sick andin ef fi cient or gani za tions, check ing the ris ing in fla tion and un fair busi ness prac tices etc. Un for tu nately, the Man age mentAc count ants have never been given the op por tu nity at the gov ern ment level to show their met tle in de liv er ing the abovespeci fied tasks. It is high time now that the Gov ern ment must con sid er to as so ci ate the ‘Ma nag ement Ac count ants’, notonly in the budget mak ing pro cess, but also in the over all eco nomic re vival pro cess, and util ize their pro fes sional skillsand ex per tise to tackle a host of eco nomic ills and mal prac tices that are pre vail ing in our so ci ety. The ‘Ma nag ementAc count ants’ can ex tend their pro fes sional ex per tise to the gov ern ment in fol low ing ma jor ar eas:

(1) Fol low ing the ‘Zero -based Budg et ing’ Ap proach in Budget Mak ing Proc essThe term, “zero- based budg et ing,” and the tech niques for car ry ing out these budg et ing pro cesses was first in tro ducedin an ar ti cle writ ten by Pe ter A. Pyhrr in the Har vard Busi ness Re view in 1970, Later, Mr. Jimmy Car ter, the formerPresi dent of USA adopted this method at the fed eral level. Since then this ap poach has gained popu ral ity in thegov ern ment and pri vate sec tors in USA and many other coun tries.

In the budget mak ing pro cess in Paki stan, there is a ten dency to use sim ple “In cre mental Budg et ing” ap proach, based on pre vious year’s budget with out any care ful at ten tion to the cost ing side. There are two ma jor short com ings ofin cre mental budg et ing:

(a) In in cre mental budg et ing, each budg eted item is started at last year's level, and the next pe riod's level is planned as an in cre ment to that level.

(b) The Gov ern ment Min is tries / De part ments en sure, when ap proach ing the end of budget pe ri od, that they spend allfunds budg eted to them, whether all such spend ing is nec es sary or not. They feel that if they do not spend all of thispe riod's budget, they will re ceive less next year.

The zero- based budg et ing sys tem puts the bur den of proof on the man ager (whether he is in gov ern ment or pri vatesec tor), and de mands that each man ager jus tify the en tire budget in de tail and prove why the or gani za tion's money bespent in the man ner pro posed. A “de ci sion pack age” must be de vel oped by each man ager for every proj ect or ac tiv ity,which in cludes an analy sis of cost, pur pose, al ter na tive courses of ac tion, per form ance meas ures, con se quences of notper form ing the ac tiv ity, and the bene fits

There is need to in tro duce “Zero based budg et ing” ap proach, which re quires jus ti fi ca tion for every ex pen di turein curred. In this ap proach, each budget item starts with an as sumed value of ‘zero’, with all changes above that hav ing to be jus ti fied. There are fol low ing bene fits of zero- based budg et ing ap proach:

(a) Zero based budg et ing is based on dem on strated needs and re sources, not on his tori cal spend ing lev els, whichar gua bly leads to more ef fi cient al lo ca tion and utili za tion of re sources.

(b) Zero based budg et ing can be very ef fec tive in de tect ing and elimi nat ing in flated budg ets, or budg ets that re flectwaste ful op era tions.


6 Budget Pro pos als 2012-13

The Man age ment Ac count ants have the re quired ex per tise in ‘Zero -based budg et ing’ and can as sist thegov ern ment in pre par ing and im ple ment ing budg ets based on costed stra te gic plans.

(2) In tro duc ing Cost Ac count ing Sub- Systems in Lo cal Bod ies It is a fact that the pub li c de liv ery sys tem in Paki stan is not to the sat is fac tory stan dards and is de clin ing with the pas sage of time. Moreo ver, there is also no con trol mecha nism in place in lo cal gov ern ment for ef fec tive utili za tion of pub li c fundsand re sources, which leads to wast age or mis use of pub li c money. There is, there fore, need to strengthen lo calad mini stra tion and de liv ery of ba sic serv ices. It should be made pre- requisite for the Lo cal bod ies to de velop a ‘Cost Ac count ing Sub- system’, in ad di tion to ex ist ingfi nan cial man age ment sys tem, as an in stru ment to sup port lo cal gov ern ment man age ment. This would lead to bet teref fi ciency, ef fec tive ness and econ omy in re source ap pli ca tion, thereby al low ing a more suit able mecha nism for bet teruse of tax pay ers money.

The pro fes sional ex per tise of Man age ment ac count ants could be util ized in de vel op ing and ad min is ter ing the‘cost ac count ing sub- systems’ at the pro vin cial and lo cal bod ies lev els.

(3) Per form ing Cost Audits of PSDP Pro jects for Per form ance Evalua tion

The Plan ning Com mis sion of Paki stan has ob served in its Re port ti tled 'Anal ysis/Re view of the PSDP (Pub li c Sec torDe vel op ment Pro gramme)' re leased in August 2011, that poor plan ning, un clear scope defi ni tion, un clear goals,pro cure ment leak ages, de fi cient plan ning and poor gov ern ance are some of the key rea sons for the fail ure of PSDPproj ects. The Re port has fur ther pointed out that over all over Rs 50 bil lion, equiva lent to 21 per cent of the origi nalFed eral PSDP for 2010-11, was al lo cated for po liti cal pro grams which, con sid er ing the tight fis cal space, needs to becur tailed.

The Plan ning Com mis sion has rec om mended in its Re port that quali ta tive and so cial audits be car ried out to evalu atethe proj ect suc cess, es pe cially for those proj ects that cre ate a broad so cial im pact.

The above ob ser va tions and rec om men da tion by the Plan ning Com mit tees greatly ne ces si tates the im por tance and ur gent need for car ry ing out ‘cost audits’ of PSDP Pro jects. The Man age ment Ac count ants, quali fied fromICMAP, should be as so ci ated for ef fec tive ‘cost man age ment and con trol’ of the Pub li c Sec tor De vel op mentPro grams (PSDPs) im ple mented in all the prov inces.

(4) Put ting a Check on Ris ing In fla tion by Fix ing Sell ing Price based on Cost AuditThe Man age ment Ac count ants can help the gov ern ment in put ting a check on ris ing in fla tion, es pe cially of es sen tialcom modi ties and ma te ri als of na tional im por tance such as steel, ce ment etc. This would be done through per form ingcost audit to ar rive at the ac tual cost of pro duc tion of these prod ucts, thereby bring ing into lime light the cost – pricemar gin. On the ba sis of cor rect cost ing data, the gov ern ment would be in a po si tion to fix rea son able sell ing prices ofprod ucts and thus un due profi teer ing will be checked, and the con sum ers / gen eral pub li c would be saved fromex ploi ta tion and un rea son able price hike. A healthy com pe ti tion would be gen er ated among the vari ous units in anin dus try.

The above role of Man age ment Ac count ants could only be pos si ble if the gov ern ment de cides in prin ci ple tomake a man da tory re quire ment for all the manu fac tur ing units to ob tain a cost audit re port / cer tifi cate from aCost Ac count ant, quali fied from ICMAP, veri fy ing therein the ac tual cost of prod uct (s). This re quire ment needle gal cover through an act of the Par lia ment.


Budget Pro pos als 2012-13 7

(5) As sist ing the CCP in iden ti fy ing Preda tory and Trans fer Pric ing CasesThe ‘Ma nag ement Ac count ants’ can also ex tend their pro fes sional ex per tise to the Com pe ti tion Com mis sion of Paki stan (CCP) in iden ti fy ing and fil ing cases against ‘Pred atory Pric ing’ and ‘Tran sfer Pric ing’ trans ac tions, thereby en sur ing acom peti tive en vi ron ment for all the mar ket play ers. Preda tory pric ing is the prac tice of sell ing a prod uct or serv ice at a very low price, in tend ing to drive com peti tors out ofthe mar ket, or cre ate bar ri ers to en try for po ten tial new com peti tors.

Trans fer pric ing re fers to the pric ing of con tri bu tions (as sets, tan gi ble and in tan gi ble, serv ices, and funds) trans ferredwithin an or gani za tion. The choice of the trans fer price will af fect the al lo ca tion of the to tal profit among the parts of thecom pany. This is a ma jor con cern for fis cal authori ties who worry that multi- national en ti ties may set trans fer prices oncross- border trans ac tions to re duce tax able prof its in their ju ris dic tion. This has led to the rise of trans fer pric ingregu la tions and en force ment, mak ing trans fer pric ing a ma jor tax com pli ance is sue for multi- national com pa nies.The mul ti na tional com pa nies have a promi nent pres ence in Paki stan and they fre quently trans fer re sources amongas so ci ate con cerns / units op er at ing in dif fer ent parts of globe. Such trans ac tions have a great im pact on theirprof it abil ity vis- à- vis tax li abil ity. Un for tu nately, there is not any regu la tion or leg is la tion that can check such trans ferpric ing trans ac tions. The Cost Audi tors can play a role in pro vid ing a sys tem of check on such trans fer pric ingmecha nisms.

(6) As sist ing the NTC to help In dus try in Anti- dumping Cases based on Cost in for ma tion

The pro vi sions re lat ing to anti dump ing laws are of spe cial sig nifi cance in the con text of cost ac count ing. Thede ter mi na tion of nor mal value, do mes tic price, quan tum of in jury etc. all re quires cost in for ma tion. Manu fac tur ers in thede vel oped world are so well equipped with data that they ob tain speedy re lief un der WTO while bene fit ing from the lackof data avail able in de vel op ing coun tries. In Anti- Dumping cases, the In ter na tional Dis pute Reso lu tion Author ity ac cepts the authen ti cated cost data from the Cost Audit rec ords, main tained by the com pa nies. Un for tu nately, when a Paki stani com pany is fac ing such an anti- dumpingduty from a for eign coun try, it does not make avail able cost data to per sue their cases and fi nally they fail to con vince thecon cerned author ity.

The Man age ment Ac count ants can work jointly with the Na tional Tar iff Com mis sion (NTC) to as sist the in dus try to make them aware of the anti- dumping/ coun ter vail ing du ties and con vince them to put their cost data inor der to face such a chal lenge in fu ture in the in ter na tional mar ket. An in- built cost ac count ing sys tem could be a great sup port to the in dus try it self in or der to check dump ing as well as topro vide in puts in cases of al leged dump ing in le giti mate ex ports. If our in dus tries main tain cost ac count ing sys tem, theycan file and fight a large number of Anti Dump ing cases against the for eign im port ers.

(7) Re viv ing the In ef fi cient Or gani za tions – both in Pub li c and Pri vate Sec tor The Man age ment Ac count ants can also be help ful in de vel op ing res cue plans for the re vival of in ef fi cient or gani za tions– both in pub li c and pri vate sec tor, and act ing as Con sult ants to over see their ef fi cient op era tion. They can help suchunits in over com ing their prob lems, achiev ing ef fi cien cies and op er at ing upto pro duc tion ca pac ity. Ir re spec tive of fewtex tile units, which can be con sid ered healthy, oth ers are giv ing mini mal pro duc tion or are pres ently in op era tive. Thetex tile sec tor can util ize the serv ices of ICMAP pro fes sion als as Con sult ants, in di ag nos ing the rea sons of sick ness oridle ness of sick tex tile units and put ting such units in op er at ing con di tion with their con sul ta tion.



En ergy and Power

Ex ist ing Sce nario

To tal in stalled elec tric ity gen era tion ca pac ity of 19,556 MW.

Paki stan hy dro power gen era tion ca pac ity stands at 6,474 MW.

Paki stan is ranked as hav ing the 6th larg est coal re serves in the world.

An nual spend ing of over USD 600 mil lion a year by the gov ern ment to up grade the ex ist ing gen era tion trans mis sionand dis tri bu tion Sys tem.

Paki stan's en ergy re quire ments are in creas ing every year and to meet the ris ing de mand of en ergy, the Gov ern ment of Paki stan is cur rently fo cusing on di ver si fi ca tion of gas sup plies, re con struc tion of hy dro power plants, con struc tion of un der ground gas stor age fa cili ties, de vel op ment of oil ex plo ra tion & pro duc tion, tap ping of re new able en ergy re sources, at tract ing for eign in vest ment and pri va ti za tion of state- owned as sets.

Cur rently there is a short fall of around 4,000 MW in the de mand and sup ply of elec tric ity in Paki stan and thegov ern ment ex pects to add about 1300 MW ca pac ity over next few years through the pri vate sec tor.

Paki stan 's coal de pos its ex ceed 180 bil lion tons and the gov ern ment is tak ing con crete steps to ex ploit them at fastpace in or der to meet the grow ing en ergy needs of the coun try. The gov ern ment is also lay ing great em pha sis on thespeedy de vel op ment of power sec tor and of fering lu cra tive in cen tives to for eign in ves tors through one- windowop era tions.

UNDP Wind En ergy Pro ject in col labo ra tion with AEDB is intended to re move the pol icy bar ri ers and cre ate anin vest ment en vi ron ment for the de vel op ment of com mer cial scale wind power proj ects in Paki stan

The in ac tion in the en ergy sec tor for the last 12 years has cre ated im mense cri sis of power in the coun try and thecur rent fi nan cial crunch has also can celled many for eign in vest ments in the coun try.

Ko rean in ves tors in its ne go tia tions with the gov ern ment has shown keen in ter est to set up of 1000 MW powergen era tion plant each at Sonda and Thar and gradu ally in creas ing them to 3000 MW in five- years pe ri od. Thecon sor tium of the Ko rean in ves tors com pris ing ma jor power gen era tion com pa nies namely Bin Daen, KEPCO,DOOSAN, PEDCO and DELOITTE would make this in vest ment based on 100 per cent eq uity with no bor row ing frombanks or fi nan cial in sti tu tions.

Paki stan pos sesses op por tu ni ties for set ting up the oil and gas pipe lines as well as elec tric ity grids within the re gionand with other neigh bor ing en ergy rich coun tries such as Iran, Tajiki stan and Turk meni stan. Paki stan also pos sessim mense po ten tial to har ness un lim ited so lar and wind en ergy. The Gov ern ment of Paki stan is now em pha siz ing on



the ac qui si tion of power through al ter nate en ergy re sources and plan ning to add 500 MW in the next 5 years throughal ter nate sources, which is likely to at tract sig nifi cant in vest ment in this sec tor.

Supply and Demand of Electricity in Pakistan

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Ex ist ingGen era tion

15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903

Pro posal/Com mit tedGen era tion

530 4,235 7,226 10,115 10,556 13,307 13,520 14,607 16,134 18,448 18,448 18,448 18,448

To tal Ex ist ing/Com mit tedGen era tion

16,484 20,138 23,129 26,018 26,459 29,210 29,423 30,510 32,037 34,351 34,351 34,351 34,351

Ex pectedAvail ableGen era tion

13,146 16,110 18,503 20,814 21,167 23,368 23,538 24,408 25,630 27,481 27,481 27,481 27,481

De mand(Sum mer Peak)

16,484 17,868 19,352 20,874 22,460 24,126 25,919 28,029 30,223 35,504 34,918 37,907 41,132

Sur plus/Defi citGen era tion

-3,338 -1,758 -849 -60 -1,293 -758 -2,381 -3,621 -4,593 -8,023 -7,437 -10,426 -13,651

Source: Private Power and Infrastructure Board - Govt. of Pakistan



(MW)

Power Gen era tion Ad di tions dur ing Jan 2009 – Dec 2012

S # YearWAPDAHy droPlants

Pub li c Sec tor un der

GEN COs

PEPCO/GEN COs

Rental IPPs un der PPIBRent als/ Fast trackPlants un der PPIB

TOTAL

No. MW No MW No MW No MW No MW No MW1 2009 — — — — 6 1053 8 1694 7 1306 21 40532 2010 3 298 1 320 — — 8 1741 3 478 14 28373 2011 2 204 3

11700325*

— — 6 1268 — — 12 3497

4 2012 — — — — — — 5 602 — — 5 602TOTAL 5 502 4 2345 6 1053 27 5305 10 1784 52 10989

Is suesDe lay in tar iff de ter mi na tions by NEPRA Un fa vor able en ergy mix Heavy de pend ence on fur nace oil gen era tionUn dis ci plined con sumerNo new ther mal power plants setupNo com mer cial trans ac tion be tween DIS COs and CPPAUn clear agenda on power sec tor re formsIn ade quate pro vi sion of tar iff dif fer en tial sub sidyNon- payment by KESC, FATA and Pro vin cial Govts.Low col lec tion and high losses of HESCO, PESCO & QESCONon bill pay ment cul ture and theftCir cu lar debtTheft and mix ing of fuel in GEN COsHigh fuel con sump tion by GEN COsTo over come short age of elec tric ity, chal lenge of global warm ing, and put the world on path to a sus tain able fu ture tomeet the en vi ron mental chal lenge.Cur rently the coun try is los ing 29 bil lion units of elec tric ity an nu ally due to line losses.

Pro pos alsRe place ment of ex ist ing sub sidy sys tem with Tar geted Sub sidy Sys tem for life line con sum ers only. Unique me tersshould be in stalled/re place for life line con sum ers. The life line con sumer eli gi bil ity cri te ria should be de fined by us ing data from Be na zir In come Sup port Pro gram or any other sur vey but it should be based on con sumer status in stead of con sump tion.There should be a com mer cial ar range ment be tween DIS COs and CPPA. The DISCO should pro vide guar an tee orLet ter of Credit to CPPA for sup ply of power.Pres ently DISCO’s are pay ing sales on bill ing/as sess ment which is cre at ing fi nan cial crunch and swel ling cir cu lardebt. An amend ment should be made for im ple men ta tion of sales tax on col lec tion ba sis.



� GoP should start the 2nd phase of Energy Conservation Campaign by the following measures.

� Mandatory Energy Audit for all Govt. Building and Energy consumption targets

� Teaching of Energy Conservation as a subject in Schools, Colleges and Universities

� Govt should encourage the Construction of Energy Efficient Houses through different concessions.

� Govt. should make it mandatory for new housing colonies to install solar or Wind as alternative source of energy. It

will not only save the existing power from domestic (subsidized consumers) but also provide encourage the

alternative energy culture in the country and will boost the investment.

� Implementation of Costing standards in Generation, transmission and Distribution Companies to check the

inefficiencies and transparency in pricing/tariff.

� Govt. should introduce a special tariff for uninterrupted supply to accommodate new thermal power plants. By

introducing the tariff the existing consumer will not affect and thermal power would remain operational /available for

willing/affording consumers. The Institute of Cost and Management Accountant can provide support on this issue.

� The existing crisis may be handled through efficient pricing and an effective regulatory regime. The Govt. should

engage Institute of Cost and Management Accountants of Pakistan for pricing methodology and research on cost of

service study.

� Govt. should Develop Power Parks in all industrial cities.

� New Power Stations should be based on Imported Gas/LNG/Coal (Imported / Local)

� Import and manufacture of standard energy efficient appliances

� Implementation of Corporate Governance and induction of experts on Board of Directors.

� Introduction/establishment of Energy Trading Market

� Provision of Future Contracts of fuel

� Government should provide guarantee and financial support to new power plants.

� Implementation the concept of Performance Contract

� Induction of Cost and Management Accountants in Planning Commission, Ministry of Finance, Economic Affairs

Division and NERPA to make these departments efficiency oriented.

� Government may execute such short-term power projects, which are easier to construct to resolve the energy crisis

being faced by the country.

� Around 70 percent energy can be saved if buildings are properly insulated for transfer of heat and cold from outside.


12 Budget Proposals 2012-13

So lar and wind en ergy, geo- thermal and bio mass and bio- fuels will not only pro vide en ergy to the en tire world but will also help in re duc ing en vi ron ment pol lu tion.

In duc tion of En ergy Saver Lamps (CFLs) to re place in can des cent lamps and tube lights

Loss re duc tion by DIS COs thru im ple men ta tion of ELR Pro jects, AMRs/RMS/Smart Me ter ing and by Ad min is tra tiveMeas ures

Switch ing of un nec es sary Lights and Ap pli ances at peak hours vol un tar ily by gen eral pub li c.

Gov ern ment should make ar range ments so that all shops and of fices must be closed on Sun days while the Fac to ries should be closed on some other day (for in stance on Fri day).

Gov ern ment should for mu late pol icy for the con struc tion of build ings and im ple men ta tion of pol icy should be man da tory for all agen cies re spon si ble for plan ning, de sign ing and con struc tion of the build ings.

Gov ern ment should take ac tions against bill boards and hoard ing, which are us ing ex ces sive lights be yond theirpre scribed quota.

Fur ther Gov ern ment should abol ish all types of im port duty and taxes on the im port of en ergy saver lamps to madethem af ford able for the com mon man.

All old ther mal units, which are less ef fi cient, should be re placed (in a pro grammed way) with more ef fi cientcom bined cy cle plants.

To pro duce cheap elec tric ity in dige nous coal should be used in stead of fur nace oil etc.

In big Cit ies like Ka ra chi , La hore , Fais ala bad etc. Gar bage Fired Power Sta tions of rea son able ca pac ity (forex am ple 100 to 200 MW ca paci ties) should be in stalled.

Gov ern ment should start mega hy dro power proj ects like Kala Bagh Dam, Ak hori Dam, Basha Dam, Kruuam TangiDam and Munda Dam on ur gent ba sis.

To con struct Hy del Power Pro jects on Run of riv ers, which in cludes Dasu, Thakot, Pa than, Bunji etc should be giventop pri or ity. Dasu with a gen era tion ca pac ity of 4000MW is near est to the load cen ters and should be com pleted firstfol lowed by other power proj ects.

Bio -E nergy should be used as an en ergy source. As a re sult of pho to syn the sis, plants are able to form bio mass andthereby store en ergy. The use of bio mass for en ergy has great po ten tial for heat and power gen era tion, and for fuelpro duc tion.



Tex tile

Ex ist ing Sce narioCon tri bu tion in to tal ex ports is around 55 per cent.

Con tri bu tion in to tal GDP is 8.5 per cent.

Con tri bu tion to to tal la bour force of the coun try is 38 per cent of which Skilled and Un skilled Ra tio is around 70:30

To tal Sec tor In vest ment is Rs. 515.2 bil lion

Value ad di tion (in ag gre gate ) is 27 per cent.

Paki stan share in world trade of Cot ton Yarn: 32.8%

Paki stan share in world trade of Cot ton Cloth: 8.1%

Paki stan is the fourth larg est pro ducer of cot ton

Mar ket Capi tali za tion (Listed Com pa nies): 5.11% Of To tal Mar ket Capi tali za tion

Source of Ma chin ery: Ja pan, Ger many, Swit zer land, Bel gium, It aly and China.

Top Buy ers: USA, EU, Gulf re gion, UK, Hong Kong, Ja pan, Ko rea, Saudi Ara bia, It aly, Tur key, Ger many, Nor way,France, Can ada, Swe den, Aus tra lia, etc.

Is suesLoads shed ding and power short ages re sult ing in low ca pac ity utili za tion.

In con sis tent Gov ern ment poli cies

High markup rates and Util ity charges

Low Value Ad di tion

Cost lier in put cost of raw ma te ri als Lack of in fra struc ture fa cili ties

Pro pos alsUn in ter rupted sup ply of power/ en ergy is com pul sory to en sure pro duc tiv ity and bet ter re sults of pro duc tion andecono mies of scale.

Con sis tency in gov ern ment pol icy is es sen tial. De spite in tro duc tion of five- year Tex tile Pol icy, im ple men ta tionre mains to be seen.

Mark up rates also needs im me di ate at ten tion and should be equal to Ex port fi nanc ing rates.

There is a need to en gage young quali fied gen era tion as rov ing am bas sa dors of mar ket ing cali ber, di plo macy andpro fes sional ap proach.



Cost sur veys be ini ti ated to de ter mine com peti tive ness of Tex tile In dus try vis- à- vis its re gional com peti tors inin ter na tional mar kets .

Fa cili ta tions for Tech nol ogy Up gra da tion of Weaving- Processing and Made- up sec tors.

In tro duc tion of Cleaner Pro duc tion con cepts

In cen tives need to be linked with value ad di tion – mar ket ex pan sion – im prove ment in Qual ity & Pro duc tiv ity lev els.

Pri or ity In vest ment in Dyes/ Chemi cals & Tex tile Ma chin ery to re duce capi tal cost and im prove com peti tive ness.

In creased share of syn thetic Tex tile in pro duc tion & ex ports.

Firm level R&D need to be en cour aged through tax in cen tive for up- gradation of prod uct qual ity and pro duc tiv ity.

In come TaxWith hold ing tax ad just ment should be avail able to Tex tile Sec tor ir re spec tive whether they are un der Fi nal TaxRe gime.

Rate of col lec tion of tax at the im port stage for manu fac turer and ex porter should be 1%.

Fed eral Ex cise Duty ad just ment should be avail able

Spe cial Taxa tion rate for Tex tile em ployee should be in tro duced at re duced rate.

Tax Re fund may be al lowed on sub mis sion of An nual Re turn of In come.

Sales TaxPro ce dure for Re fund of Spe cial FED should be pre scribed.

Only FBR des ig nated em ployee would be author ized for ex cess in put Ad just ment.

Ad just ment of in put tax on ac qui si tion of fixed as sets al low able in month of pur chase.

Un ad justed In put tax bef ore zero rate re gimes may be al lowed af ter duly veri fi ca tion from Cost and Man age mentAc count ants of Paki stan or Char tered Ac count ants.

Re fund pro ce dure for all old re fund may be stream lined.

Dis posal of Ap peals at all fo rums may be com put er ized for a trans par ent pro cess.

Pro ce dure for re vi sion of re turn should be made easy.

Af ter re ply ing the show cause no tice against monthly re fund claim, proc ess ing of file should be com pleted within 30days from the date of fil ing of re ply to show cause no tice.

Time frame to be re des igned for early so lu tion of cases in dif fer ent fo rums of ap peal.

Cus tomsZero rate duty would be lev ied on im port of plant & Ma chin ery for in stal la tion of new unit in Paki stan with out anybonded ware house con di tions etc.

Duty on im port of Die sel and other gen era tors would be zero per cent only af ter sub mis sion of un der tak ing that theywould be used only use for manu fac tur ing pro cess.



Ce ment


The Op era tional ca pac ity of ce ment is about 44 mil lion tons & clinker 41 mil lion tons

Sur plus Ca pac ity is 10.59 Mil lion tons

Per cap ita an nual con sump tion is 131 kg

Ca pac ity utili za tion of in dus try is 77%

Ex ports of ce ment and clinker dur ing 2010-11 stood at 9,27 mil lion tons, whereas dur ing the 9 months of 2011-12,ex ports was around 6.24 mil lion Tons

Is sues

Re duc tion in PSDP (Pub li c Sec tor De vel op ment Pro jects)

High cost of en ergy and markup rate

Tax .Rs 96 per bag in clu sive of Rs. 45 fed eral ex cise duty per bag

Ce ment is be ing treated as lux ury item for the pur pose of tax and du ties

Heavy Mark ing fee is charged on ce ment by Paki stan Stan dards and Qual ity Con trol Author ity

Ex port hur dles

Pro pos als

Gov ern ment must kick- start con struc tion ac tiv ity by launch ing in fra struc ture proj ects prom ised in the Pub li cSec tor De vel op ment Pro gramme (PSDP).

In ter est rate should be re duced.

Ce ment in dus try has heavy tax rates i.e.Rs. 96 per bag in clu sive of Rs. 45 fed eral ex cise duty per bag , it should bere duced to sup port the in dus try.

Ce ment should be treated as ne ces sity not as lux ury item for the pur pose of tax and du ties.

Mark ing fee should be re duced.

Gov ern ment should in ter vene and help in the with drawal of non tar iff bar ri ers im posed by In dia in vio la tion of theSAARC agree ment i.e. 12% im port duty on ce ment, etc.



Oil & Gas


Oil and Gas ac counts for 80% of the en ergy needs of Paki stanAn nual in vest ment of over USD 350 mil lion in the in dus try119 ex plo ra tion Li censes & 127 de vel op ment & Pro duc tion lease is sued by the OGRA so far696 oil wells have been ex plored in Paki stanOil & Gas are two of the ma jor com po nents of Paki stan's En ergy mix con trib ut ing more than 80% to 60.4 mil lion TOE of en ergy re quire ment in Paki stan.The com mer cial re quire ment of en ergy in the coun try has dou bled over the last dec ade as the de mand for en ergyhas been in creas ing due to the con tinu ous growth of the econ omy.A well de vel oped and in te grated in fra struc ture for trans por ta tion, dis tri bu tion and utili za tion of natu ral gas with 9,916KM of trans mis sion and 84,000 KM of dis tri bu tion net work.Paki stan is the second largest con sumer of CNG in the trans port sec tor in the world. Pres ently, 2,068 CNG sta tionsare op er at ing in the coun try serv ing over 1.7 mil lion ve hi cles.

Is sues

Heavy de pend ence on imported oil due to gas shortage

Re gional geo po liti cal sen si tivi ties

De clin ing share from in dige nous sources

E&P and OMCs tak ing bene fit from cur rent sce nario

Pro pos als

De velop coun try's own re sources of oil and gas

Bring coal into the ma jor fo cus

Need to be self- sufficient in en ergy, based on in dige nous gas, coal, hy del and oil

Ex am ine gas im port op tions on some ur gent ba sis

In stal la tion of Small/ large coal ga si fi ca tion plants

Need for mul ti lat eral frame work for ad dress ing criti cal is sues with neigh bour ing coun tries



Pe tro leum

Sr # Ref er ence Is sues Pro pos alsSALES TAX

1 Sec tion 4

Zero- rating

Lo cal pur chases of POL prod ucts from re fin er ies and im ports of such goods by the OilMar ket ing Com pa nies are sub ject to salestax, which is ad mis si ble for de duc tion fromout put tax at the time of sup ply. Gen er ally, thequan tum of in put tax for Oil Mar ket ing Com pa nies is higher than out put tax aris ing in atax pe ri od due to regu lar sup plies of POLprod ucts at zero per cent sales tax rate to unitssitu ated in Ex port Proc ess ing Zone, out- bound / for eign flight/ves sels re fu el ing, ex ports and main tain ing stra te gic stocks at country- wide net work. This re sults in aris ing ofsales tax re funds as a regu lar fea ture, as filedand pur sued by Oil Mar ket ing Com pa nies (OMCs) from the fis cal authori ties, af fect ingprof it abil ity of the OMCs

Sales tax on lo cal pur chases of pe tro leumprod ucts from oil re fin er ies and im port ofpe tro leum prod ucts (in put tax) may be sub jected to rate of zero- percent un der Sec tion 4 of theAct. For this pur pose, sales tax no ti fi ca tion un der Sec tion 4 may kindly be is sued.

Al ter na tively, a Gen eral Or der may be is suedfor de scrib ing the pro ce dure simi lar to thatal ready pre scribed un der Fed eral Ex ciseGen eral Or der No.1/2005, dated 01 July 2005 for zero–rated sup plies to oil mar ket ing com pa nies (OMCs) by re fin er ies and at im port stage for zero- rated sup plies and ex port ofPOL prod ucts by OMCs

2 Sec tion 8B Un der sec tion 8B, tax charged on the ac qui si tion of fixed as sets shall be ad just able against theout put tax in twelve equal monthly in stall ments

In the light of Judg ment of Su preme Court re gard ing in put tax claim on fixed as sets, it is pro posed that a change should be made insec tion 8B for al low ing 100% in put claims onfixed as sets in the rele vant month

3 Sec tion 10Ex cess in put taxcar ried for ward

Sec tion 10 of the Act al lows carry for ward ofex cess in put tax against sup plies other thanzero- rated and ex ports from one tax pe ri od tothe next tax pe ri od. How ever, the ex cess in puttax aris ing in a tax pe ri od as at trib ut able to zero- rated sup plies and ex ports are re quired to bere funded within 45 days of the fil ing of the re fund claim. How ever, due to com plex re fund proc ess ing pro ce dures, the re fund claims are not gen er ally al lowed within the pre scribedti me frame.

The reg is tered per son, par ticu larly the Oil Mar ket ing Com pa nies, should be al lowed tocarry for ward or file the re fund on ac count of theex cess in put tax in re spect of the zero- rated and ex ports in ad di tion to that at trib ut able to lo caltax able sup plies. This will help the Oil Mar ket ing Com pa nies to mini mize fil ing ofre fund claims with the Col lec tor ate of Sales Taxin re spect of zero- rated sup plies and ex ports.

Fur ther re fund claims of units lay ing in theju ris dic tion of LTUs should be proc essed with in pe ri od of 5 days.



FEDERAL EXCISE DUTY4 Ta ble I of the First

Sched ule toFed eral Ex cise Act,2005 Levy ofFed eral Ex ciseDuty on lu bri cant on fix ed price

Ac cord ing to the se rial No. 22 & 23 of the FirstSched ule to the Fed eral Ex cise Act, 2005, theFED is be ing charged on Lu bri cat ing Oils on theba sis of Re tail Price. Pre vi ously, the rate of FED on lu bri cat ing oils was Rs.7.15/per li ter, which was sub sti tuted vide Fi nance Act, 2006.

It would be ap pro pri ate if the levy of FED weresub jected at a rate de pend ent of value or valuebased on li tre, to ease the dis charge of ex ciseli abil ity.

5 Sec tion 6Ad just ment ofdu ties of ex cise

Un der Sec tion 6(1) of Fed eral Ex cise Act 2005,the Fed eral Ex cise duty paid on pur chase of in put goods is ad just able on the ba sis ofcon sump tion of in put goods for the manu fac ture or pro duc tion of ex cis able goods.

Ad just ment of FED is al lowed on the ba sis of con sump tion in the pro duc tion. How ever,duty is paid to lo cal sup pli ers for in put goods atthe time of pur chases or at the time of im port clear ance there fore, the amount of FEDmen tioned in the Fed eral Ex cise Re turn does not rec on cile with ac tual pay ments against the Fed eral ex cise in voices due to tim ingdif fer ences.

It is pro posed that, in har mony with the sales tax law, the ad just ment of in put FED may please be al lowed on the ba sis of ac tual pur chases madefor manu fac tur ing / pro duc tion of ex cis ablegoods i.e. lu bri cants in case of Oil Mar ket ingCom pa nies.

Fur ther du ties paid on pur chases re lated toex port might be al lowed from lo cal li abil ity ofsales tax as in put tax.

Sec tion for re fund claim

It is pro posed that a sec tion for re fund claims ondu ties paid on pur chases made for ex port maybe in serted in Fed eral Ex cise Act 2005 and alsorules and pro ce dures for re fund claims may beis sued by BOARD.

CUSTOM ACT6 Sec tion 86

Con di tion of postdated cheque forgoods clear ance:Con di tion of postdated cheque forgoods clear ance

Through Fi nance Act, 2005, Sec tion 86 of the Cus toms Act, 1969 was sub sti tuted wherein the sub mis sion of post dated cheque andin dem nity bond has been made a man da tory re quire ment, while clear ing im ported goods from the ware house. Due to above re quire ment, the Oil Mar ket ing Com pa nies are fac ing agreat deal of ad min is tra tive has sle as the im ported POL prod ucts are trans portedthrough pipe lines un der cus toms bonds tovari ous up- country lo ca tions, from where suchprod ucts are cleared af ter pay ment of duty &taxes.

The con di tion for sub mis sion of post datedcheque and in dem nity bond equiva lent to dutyand taxes for clear ance of POL prod ucts prior toclear ance at the up- country des ti na tion should be with drawn im me di ate ly par ticu larlyin case of ware hous ing and trans por ta tion ofPOL prod ucts.



7 Rule 300(2)

Chap ter 7 ofCus toms

2001 Grant ofDTRE Ap proval:

Un der Rule 300(2) of the Cus toms Rules, 2001,the re mis sion of cus toms duty, ex cise duty,sales tax and with hold ing tax is ad mis si ble uponfur nish ing of speci fied docu ments un der DTRE ap proval. Whereas, the Pe tro leum De vel op ment Levy [PDL], as ap pli ca ble on speci fied pe tro leum prod ucts un der the Pe tro leumProd ucts (De vel op ment Levy) Or di nance, 1961and Pe tro leum Prod ucts (De vel op ment Levy)Rules 1967, is not cov ered un der the afore- said Rule.

Un der the law, PDL is col lected and paid in thesame man ner as im port duty in case of im ported pe tro leum prod ucts and as a duty of ex cise incase of pe tro leum prod ucts pro duced in Paki stan. There fore, for all prac ti cal pur poses,PDL is treated as ex cise duty, as such theex port ers of POL prod ucts, on which PDL isap pli ca ble, should be al lowed re mis sion of PDLin ad di tion to other du ties and taxes un derDTRE ap proval.

Rule 300(2) of the Cus toms Rules, 2001 maykindly be amended to in clude PDL so that the Oil Mar ket ing Com pa nies may also avail the fa cil ity of duty- free pro cure ments / im ports un der DTRE ap proval in re spect of POLprod ucts meant for ex port to Af ghani stan.

8 Rule 307E of Sub- Chap ter 7 ofCus toms Rules,

DTRE audit. - (1)

The li abil ity of a DTRE user to pay duty andtaxes un der a Se cu rity in stru ment fur nished byhim un der this sub- chapter, shall Not bedis charged un less post- exportation audit iscar ried out and com pleted sat is fac to rily within ape ri od of twelve months af ter the pe ri od speci fied in rule 305 or af ter fil ing ofrec on cilia tion state ment un der rule 30 7D,which ever is ear lier.

DTRE audit. - (1) The li abil ity of a DTRE user topay duty and taxes un der a se cu rity in stru ment fur nished by him un der this sub- chapter, shall not be dis charged un lesspost- exportation audit is car ried out andcom pleted sat is fac to rily within a pe ri od oftwelve months af ter the pe ri od speci fied in rule 305 or af ter fil ing of rec on cilia tion state mentun der rule 307D, which ever is ear lier.

Pro vided that if audit shall not car ried out or com pleted with out any valid rea son, it shall bedeemed to be com pleted and regu la torycol lec tor has pow ered to re lease the se cu ri ties sub mit ted against ap proval of DTRE.



Phar ma ceu ti calSr. Eco nomic meas ures Is sues Pro pos als1 Ex ten sion of ex port

sam ple limitCur rently Phar ma ceu ti cal com pa nies are al lowed to ex port free sam ples to the ex tent often per cent of the com mer cial ex ports’quan tity.

o To in crease free ex port sam ple limit fromthe cur rent 10% to 20% as the ex portre quires reg is tra tion and strin gent pro mo tional ac tivi ties, it gets dif fi cult to stay within the10% band with.

o Moreo ver, the ex port limit should not betied on con sign ment to con sign ment ba sis, but the ap proved limit pre scribed and agreedover a pe ri od of one fi nan cial year

2 Im port Duty and Taxes Cur rently im ports of phar ma ceu ti cal API, chemi cals, and pack ag ing ma te ri als at tract the fol low ing du ties and taxes. This raises the cost of pro duc tion.1. Cus tom duty 5%-20%2. W/H tax 2%3. SED 1%

In or der to boost the ex port it is stronglyrec om mended that taxes and du ties on all theitems use for the ex port able fin ished prod uctsshould be tax free.

3 Gen eral Sales Tax There is 16% - 21% GST on pack ag ing andother pro mo tional items used by thephar ma ceu ti cal com pa nies.

GST is not al lowed as an out put tax. This coston av er age con sti tutes 5% of sales to theex port unit of phar ma ceu ti cal in dus try. Theim pact of GST can not be trans lated on ex port price hence it is strongly rec om mended to ex empt the phar ma ceu ti cal in dus try from sales tax on pack ag ing ma te ri als.

4 Im port du ties & taxes on ma chin ery equip mentsand re search equip ment and gen era tors

Im port du ties & taxes on ma chin eryequip ments, re search equip ments andgen era tors1. Cus tom duty up to 35% (on equip mentssuch as Air Han dling Units and Con dens ingUnits etc.)2. Sales tax 16%3. In come tax 1%4. SED 1%

This in creases the in vest ment of thephar ma ceu ti cal in dus try and re sults inbor row ing at soar ing rates. Hence it is strongly rec om mended that ma chin ery, equip ments,and gen era tors sets for ex port unit ofphar ma ceu ti cal com pany should be ex empted.

5 Ex port re fi nance fa cil ity SBP cur rently pro vides ex port re fi nance fa cil ity in the ra tio of 2:1

It is rec om mended to re duce the per form ancere quire ment to 1:1 ra tio for phar ma ceu ti calprod ucts.

6 Mark up cost on ex portre fi nance fa cil ity

Mark up cost on ex port re fi nance fa cil ity at themo ment is 7.5% which is very high ascom pared to the rates charged in the neigh bor ing coun tries.

This cost needs down ward re vi sion; there foreit is sug gested to re duce the same to 5%.



7 Ex change rate spread(buy ing and sell ing)

Cur rently this spread is soar ing as high as 2%. This makes all the im ports stuff very ex pen sive and on con ver sion of ex port pro ceeds thisgives a dou ble edged sword treat ment.

Maxi mum spread be tween buy ing and sell ingex change rates should be main tained throughstan dard mecha nism at 0.3%. This will helpphar ma ceu ti cal in dus try avoid ing the dou ble edge sword treat ment of both on re ceipt andon pay ment.

8 Terms fi nance fa cil ity There is no term fi nance fa cil ity avail able forphar ma ceu ti cal unit en gage in ex ports simi larto the one given tot the tex tile sec tor. Whereas, Phar ma ceu ti cal in dus try is highly capi tal in ten sive in dus try en tail inghuge capi tal ex pen di tures.

It is strongly rec om mended thatphar ma ceu ti cal in dus try should bein cor po rated in (LTF-EOP) mode of fa cil ityun der the State Bank of Paki stan.

9 Vari ous other taxes Phar ma ceu ti cal ex ports are sub ject to vari ous di rect and in di rect taxes that are nowag gre gat ing to the tune of 5% on sales. Theseare1. W/H tax 1% of sales2. Ex port de vel op ment

sur charge 0.25% of sales3. Court charges on ex port

docu ments 0.30% of sales4. Sales tax and ex cise

du ties on utili ties and tele com mu ni ca tion 17%

5. Power Gen era tion in ef fi ciency 1% of sales

6. Regu la tory mat ters (EOBI, SESSI, Shop and

es tab lish ment charges 0.50%

All these charges should be with drawnim me di ate ly, or con ces sion ary meas uresshould be in tro duced to en able thephar ma ceu ti cal in dus try by claim ing there duce rates.

10 For eign ex changere ceipt re ten tion infor eign cur rencyac count.

At this given mo ment of time SBP al lows only15% re ten tion of for eign cur rency on re ceipt.This is gross in suf fi cient to meet the off shoreex penses

Re ten tion of 50% of the pro ceeds should beal lowed to en able the in dus try to fi nance theirre spec tive off shore ex penses such as fieldforce sala ries, mar ket ing staff sala ries,re im burse ment and tele com mu ni ca tions,of fi cial ex penses etc.

11 Paki stan Ex port Fi nance Guar an tee/DFAG

Cur rent fa cil ity is ap pli ca ble to US and Europeonly

It is strongly pro posed that such fa cil ity shouldbe flexi ble, and ex tended to other coun tries,es pe cially non- traditional mar kets.

12 Land and in fra struc ture There is no scheme for sales of de vel opedland with in fra struc ture at con ces sional rate. At this mo ment cost of the land in thede vel oped in dus trial area is soar ing as high as RS 120 mil lion per acre and in un derde vel oped area land is cost ing ap proxi matelyRS 60 mil lion per acre.

In the mould of in dus trial zone in In diaphar ma ceu ti cal and ex port ori ented in dus trialzone should be de velop and of fered to in dus try at con ces sional rate. In or der to avoidspecu la tive hoard ing strin gent and pro hibi tivecon di tions should be



13 Bu reau cratic and timecon sum ing pro ce duresat As sis tant DrugCon trol ler clear ance.

At pres ent ap proxi mately four to five days arere quired for ob tain ing the clear ance of ADC which some times be comes very timecon sum ing. Fur ther with drawal of sam ples fortest ing does not add any value to speed up the pro cess of ex port.

This pro cess of clear ance at the ADC of ficeshould be sim pli fied and pref era bly it shouldbe clubbed as the one win dow op era tion at cus tom. This will help in avoid ing wait ing charges and timely clear ance ofcon sign ment.

14 Ex port re bates Un til 2007 ex port re bate on phar ma ceu ti calex ports was al lowed maxi mum up to 4.5%.This has been dras ti cally re duced to 1.4% infi nance bill of 2006/2007.

It is strongly rec om mended that ex port re bates on phar ma ceu ti cal prod ucts should be raisedto 7.5%.

15 Ex port bar ri ers on pre-tax of an ti dump ing

Many coun tries in Af rica have put tradebar ri ers on phar ma ceu ti cal in dus try in flow from Paki stan like Congo & Ghana.

A strong rep re sen ta tion is re quired from TDAP to re move the mis un der stand ing on the pre- tax of an ti dump ing and WTO re stric tion.

16 R&D pay ment (Cen tralRe search Fund) shouldbe ad just able

Cur rently 1% of the pre- tax profit of phar ma ceu ti cal manu fac tur ers is pay able toMOH to wards R&D fund as per the Drug Laws.

It is pro posed that any le giti mate ex pen di tureby the Pharma in dus try on R&D ascom mu ni cated to MOH with evi dence shouldbe ad just able against the 1% pay ment. Thiswill fa cili tate R&D ex pen di ture by the lo calin dus try mak ing their prod ucts morecom peti tive both for do mes tic and ex portmar kets.

17 Ex port Freight sub sidyshould be al lowed onex port ing coun tries

Cur rently ex port freight sub sidy is al lowed onfew coun tries.

It is sug gested that this fa cil ity should beal lowed on all ex port ing coun tries. This willhelp in boost ing Phar ma ceu ti cal ex portsfrom Paki stan.

18 Sub sidy should beal lowed on reg is tra tionof prod ucts in ex port ingcoun tries

Cur rently no sub sidy is given in any coun try for the reg is tra tion of new prod ucts.

Sub sidy should be al lowed to en cour age moreex ports.



LeatherEx ist ing Sce nario

The leather in dus try in Paki stan is con tinu ing to grow Ma jor ex port ers of leather in clude China, It aly and Hong Kong ex port ing more than 45% of the to tal in ter na tionalmar ket of leather. Paki stan's share is only around 1 per cent. Ex ports to USA, the main mar ket for Paki stani leather ap parel and cloth ing, which ac counted for 19 per cent sharei.e. $61 mil lion, also, reg is tered a de cline of 9 per cent due to global eco nomic re ces sion.

Is suesLeather and Leather prod ucts from Paki stan have carved a re spect able place in the world mar ket. Made- in- Pakistanla bel and brands born in Paki stan have yet to come.Foot wear, the larg est seg ment of the leather in dus try around the world has been sur pris ingly ne glected in Paki stan.For eign fran chised com pa nies like Bata have be come a house hold name in Paki stan. Al though the en tire stuff andskill they are us ing be long to Paki stan.

Some of leather prod ucts from Paki stan es pe cially leather jack ets are much in de mand but un der the re nownedbrand names.The leather manu fac tur ers are fac ing li quid ity short age as their funds were blocked in stocks of leather gar mentspro duc tion.In ad di tion the duty draw back rates on both fin ished and leather made- ups were slashed; thus, fur ther ag gra vat ingprob lems for ex port ers ham per ing the sec tor to reach the tar get.Our in dus try has not yet reached to the econ omy of the scale as well as to the height of qual ity de manded by thechoosey mar ket.Cost of pro duc tion of leather is quite high as com pared to our com peti tors like China and In dia.

Pro pos alsThe new po ten tial mar kets iden ti fied by the ex port ers where ma jor fo cus could place for pro mot ing leather gar mentsare Po land, Ja pan and Rus sia.The Euro pean Un ion is charg ing im port duty on fin ished leather ex ported from Paki stan. The gov ern ment shouldtake up the mat ter with the Euro pean Un ion to abol ish this duty.There is an im me di ate need for es tab lish ment of a Leather Board in Paki stan, which should op er ate as anin de pend ent body and funded by the gov ern ment from ex port de vel op ment fund. A per son ex port ing value- addedleather prod ucts should head the board.Value- added ex ports like leather gar ments where there can not be any fur ther value- addition should be ex empt fromEx port De vel op ment Sur charge.Re- export of tem po rar ily im ported goods sup plied by buy ers should be al lowed with out sight let ter of credit orad vance pay ment if sup plied as free of cost.There should be no Sales Tax or Im port Duty on im port of any form of leather. Shear ing, fin ished leather with woolhas 5 per cent im port duty.



SugarEx ist ing Sce nario

Paki stan is the sixth larg est sugar pro ducer in the world. Its 86 sugar mills has the ca pac ity of pro duc ing 7.0 mil lionton nes of sugar an nu ally, in deed with full ca pac ity utili za tion that would need sup ply of 80 mil lion ton nes ofsug ar cane, the best be ing 53 mil lion ton nes in 2007-08. Pre sent an nual sugar con sump tion of the coun try has crossed 4 mil lion ton nes val ued at US$1.8 bil lion.The sugar in dus try of Paki stan pro vides di rect and in di rect em ploy ment to 1.20 mil lion peo ple par ticu larly in the ru ralar eas of the coun try.Be ing the sec ond big gest agro- based in dus try, it is a source of reve nue to the Gov ern ment of Paki stan by about Rs.22.0 bil lion, to the grow ers by Rs. 110-135 bil lion and to the ven dors, other con trac tors, trans port ers and sup pli ers by about Rs. 20.0 bil lion.

Is suesLow Pro duc tion of Sug ar cane.Low re cov ery per cent of sugar from cane.Lack of Ag ri cul tural Edu ca tion.Late sup port Price fixa tion for the cropLate pay ment to grow ersFa cili ties for bet ter us age of Bi prod uctsUn avail abil ity of R & D and tech ni cal as sis tance to the growerRoad Ac cess Tax on grower

Pro pos alsYield per hec tare in Paki stan is one of the low est in world. By R&D ac tivi ties and use of up to date ag ri cul turalprac tices, it can be im proved by 50% and the to tal cane avail able for crush ing will in crease by 50% with no in creasein area un der cane cul ti va tion.

Price pay able to grow ers is fixed by gov ern ment at uni form rate for grow ers with out tak ing into con sid era tion qual ityof cane. If price is fixed and paid with link age to qual ity, grower will get in cen tives to pro duce qual ity cane so that hecan get bet ter re turn of his pro duce.

Gov ern ment should for mu late the pol icy of timely pay ment to the grower.

Co- generation ca pa bil ity of sugar in dus try is ex plored and in dus try friendly pol icy be adopted so that coun try canover come to some ex tent the power cri sis. Sugar in dus try has a ca pa bil ity of gen er at ing 1500-1700 MW of elec tric itywith fur ther in vest ment and im prove ment.

Sup ple ment ing cane pro duc tion with sugar beet has proved suc cess ful but re search con tin ues to de ter mine ifin dus trial ad ap ta tion and com mer ciali za tion are vi able. Gov ern ment should take steps to com plete this re search assoon as pos si ble.Es tab lish ment of sepa rate Re search and De vel op ment in sti tute for sugar in dus try.Gov ern ment has im posed 15 % duty on ex port of mo las ses , its ex port should be banned and this bio fuel should beused with in the coun try for power gen era tion.



Tele com mu ni ca tionEx ist ing Sce nario

In terms of popu la tion and number of us ers Paki stan has been re tained the high est of coun try in the high esttele- density till 2011. The tele- density is cal cu lated as number of tele phone con nec tions per 100 peo ple. The tele- density of Paki stan is evalu ated with 160 mil lion mark whereas In dia is with 1.25 bil lion.

Paki stan tele- density re mained high est among the coun tries of South Asia till 2011 with mod est an nual growthcon tin ued in last sev eral years, de spite strict cor rec tive meas ures.

Paki stan to tal tele- density has been reached 66.8 per cent in 2011 with over all 110.3 mil lion us ers in clud ing mo bilephone, lan dline, and wire less whereas In dian tele- density reached 68.4 per cent with number to tal us ers stood at826.25 mil lion in 2011.

In Feb ru ary 2012, Paki stan’s tele- density has main tained at 70.6 per cent, show ing 8 per cent growth frompro ceed ing fis cal year.

The In dian tele- density wit nessed more growth on monthly ba sis whereas Paki stan tele- density grew with the moregrowth rate in six months.

Paki stan is ranked in the sec ond high est by tele den sity in Asia. In dia has re cently sur passed Paki stan with acon sis tent growth rate achiev ing an over all tele den sity of 62.31% by Oc to ber 2010.

Paki stan cel lu lar phone sub scrip tion wit nessed con stant growth in the coun try amid stiff price war and serv ices byop era tors, cross ing 105 mil lion mark.

Paki stan Tele com mu ni ca tion Author ity (PTA) lat est up date sta tis tics showed the sub scrip tion of mo bile op era tors in the cur rent fis cal year reg is tered tre men dous growth with the in crease of 5.96 mil lion on the net works of dif fer entop era tors from July to Feb ru ary.

The to tal number of cel lu lar phone SIMs has in creased to 115.9 mil lion on the net works of five op era tors by April2012.

The lan dline con nec tions have been con tin ued to show de cline in Paki stan and stood at 3.4 mil lion by six op era torsin dif fer ent re gions of the coun try. The wire less sec tor also showed dis cour ag ing trend with flat growth of sub scrib ers stand at 2.78 mil lion amid im mense com pe ti tion and fal ling rates.

Tele com play ers, mostly the mo bile net work op era tors, in vested $371.5 mil lion dur ing CY11. How ever, ow ing tosome dis in vest ments, the sec tor FDI was at nega tive $164.6 mil lion last year.

The 1HFY12 taxa tion pro ceeds from the sec tor stood at Rs58.1 bil lion, and PTA ex pects the to tal FY12 con tri bu tions to cross Rs120 bil lion.

The tele com econ omy of Paki stan is driven by the MNOs.



The Re view high lights that the mo bile tele den sity is the most in Sindh (over 80 per cent), fol lowed by Pun jab (66per cent), but less than 50 per cent in both Ba lochis tan and Khy ber Pakhtunkhwa.

There is still room for ex pan sion in the voice seg ment, es pe cially in ru ral ar eas. How ever, most op era tors are warydue to com mer cial con sid era tions.

To some what off set the im pact of de clin ing voice tar iffs, the MNOs have been levy ing ad di tional serv ice charges onpre- paid re charges and as sis tance serv ices.This shows in the ag gre gate top line of the MNOs which reached roughly Rs280 bil lion in CY11, as per the Re view.The av er age reve nue per user was hov er ing at $2.43 per month in De cem ber 2011, com pared to $2.53 in De cem ber2010.

Paki stan is no doubt a heavy tex ting mar ket. The coun trys sms traf fic was ranked sixth in 2010 in Asia- Pacific, onlybe hind China, the Phil ip pines, In do ne sia, In dia and Ja pan, ac cord ing to Por tio Re search, a UK- based tele comre search com pany. The Re view es ti mates that in CY11, Paki stanis gen er ated over 256 bil lion sms, nearly 50per cent more than 175 bil lion in CY10.

In the end, the PTA men tions the meas ures it has taken as the cus to dian of the sec tor. Dur ing CY11, the watch dogcame up with a Tar iff Aware ness Guide for tele com sub scrib ers. The ob jec tives of the tar iff guide were to in form thecus tom ers about their rights, the op era tors ob li ga tions, tar iff pack ages, and ave nues for reme dies & re dres sals oftheir com plaints against the op era tors.

The Re view also in forms that PTAs crack down on il le gal SIM phe nome non has re sulted into block ade of 12.6 mil lionac tive SIMs and re jec tion of an other 11 mil lion il le gal ac ti va tion re quests. Through the pro cess of Auto ma tion of Pre- Sale Docu men ta tion, the regu la tor ex pects the phe nome non to re cede.

Dur ing 1HFY12, PTA re ceived 16,642 com plaints, 97 per cent of which are claimed to be re solved, and 133,000sub scrip tions are said to be sus pended for un so lic ited & il le gal com mu ni ca tions. Roughly 69 per cent of thecom plaints were against the MNOs, mostly about spam ming, un so lic ited tele mar ket ing, and ob nox ious & fraudu lentcom mu ni ca tions. Around 29 per cent of the com plaints were against PTCL.

Ex pect edly, the tele com watch dog dis cussed the most- anticipated de vel op ment of the sec tor, the auc tions of the 3Gmo bile spec trum (and the in sta phone li cense).

Is suesA cut throat com pe ti tion is eat ing the mar gins of profit of the tele com com pa nies and this de clin ing trend may lead tothe de cline of Tele com Sec tor.

Cost of pro duc ing and ren der ing the serv ices is in creas ing due to high ad ver tise ment and un con trolled ex pan sion of in fra struc ture.

En vi ron men tal Pol lu tion is in creas ing due to ex ces sive number of tow ers on resi den tial build ings and com mer cialar eas.

In spite of the em bargo on new Li censes, spe cial ap prov als are be ing granted for the new en trants.



Com mer cially un vi able ar eas are cost ing in mul ti ple ways like loss of reve nue, reve nue col lec tion, de vel op mentex penses and de struc tion of in stal la tion in the war zone ar eas.

High load shed ding is also in creas ing cost of pro duc tion of serv ices, as the al ter nate sources are very ex pen sive.

A number of regu la tory bod ies are con trol ling the ba sic and value added serv ices of the tele com sec tor

Pro pos als

Gov ern ment should play an ac tive role to stop this de struc tive com pe ti tion en vi ron ment

Green tower con cept must be fol lowed to avoid this en vi ron mental pol lu tion and ex ces sive cost of the com pa nies.

No more li censes should be granted till the ma tur ity of the pres ent tele com sec tor, which is al ready go ing throughas tro nomi cal sur vival pres sures.

Spe cial sub sidy/in cen tives may be given to the tele com sec tor for pro vid ing the serv ices in the war zone where thelosses are very high doe to loss of reve nue, reve nue col lec tion, high re pair and main te nance cost and de struc tion ofin stal la tion.

Now ru ral ar eas are not only re quires the ba sis tele com serv ices but they need the IT serv ices as well. Some spe cialin cen tives should be given to en hance the pro vi sion of these serv ices in ru ral ar eas in ad di tion to uni ver sal serv icefund (USF).

Main serv ices pro vid ing ex changes must be ex empted from load shed ding to fa cili tate the un in ter rupted, smooth and regu lar sup ply of serv ices to all the im por tant/vi tal in stal la tions, serv ice us ers and to re duce the cost of pro duc tion

Uni form pol icy should be in tro duced in stead of sepa rate poli cies for the mo bile sec tor and fixed line op era tors

The con cept of con ver gence of regu la tory bod ies should be in tro duced so that all types of tele com serv ices may bedealt with un der a sin gle um brella



In for ma tion Tech nol ogyEx ist ing Sce nario

Paki stan IT in dus try has been ris ing gradu ally since the last five years. The to tal number of IT com pa nies reg is teredwith the Paki stan Soft ware Ex port Board is more than 1500.The growth in the number of com put ers dur ing the last ten years was over 35%. This has been pos si ble due togov ern ment lib eral im port pol icy and re duc tion/ re moval of du ties.It is es ti mated that there are roughly 450,000 new com put ers every year in Paki stan. While this seems a piti fully thesmall num bers, it rep re sents a three- fold in crease com pared to 1996-1997. Ana lyst pre dicts that this number willin crease 4-5 times in the next three years.Cur rently, Paki stan ex ports about $35 mil lion worth of soft ware a year to the en tire world, as com pared to $8 bil lionfrom In dia, $5 bil lion from Ire land and $1.5 bil lion from Is rael. The to tal size of IT serv ices mar ket in the worldac counts for $315 bil lionIT ex ports are es ti mated at US$ 1.4 bil lion while the in dus try size is es ti mated at US$ 2.8 bil lion.Uni ver si ties/Col leges are pro duc ing ap proxi mately 20,000 IT gradu ates per an num. Tax ex emp tion till 2016 isavail able to this sec tor.

Is sues:Fully equipped In for ma tion Tech nol ogy Parks (ITPs) are not avail able for the smooth op era tions of IT com pa nies.Lack of af ford able space for the func tion ing of IT com pa nies on the ba sis of 24hrs a day/7 days a week/365 days ayear.Short of ex perts/IT Pro fes sion alsNo spe cial fi nanc ing scheme ex ist s for IT busi nessesAc cept abil ity of IT serv ices in pub li c sec tor or gani za tions is not en cour ag ingEx ist ing In fra struc ture for IT serv ices is not ful fill ing in ter na tional mar ket needs

Pro pos als:Gov ern ment should es tab lish ef fec tive In for ma tion Tech nol ogy Parks (ITPs) in Fed eral & Pro vin cial Capi tals onPub li c Pri vate Part ner ship ba sis so that IT com pa nies con cen trate on their core busi ness and not on pe riph eralis sues re lated to fa cili ties. ITPs should also act as a show case to the in ves tors. Re duce BW rates at least in theITPs. Of fer Serv ice Level Agree ment (SLAs) on all serv ices.Di rec tive from the PM to all Fed eral & Pro vin cial Gov ern ments, af fili ated de part ments and semi Gov ern mentOr gani za tions to pro cure soft ware only through lo cal IT com pa nies. Word ing of the Di rec tive and the meth od ol ogy ofthe award of con tracts to be worked out.The un der con sid era tion E. Gov ern ment proj ects, PSEB & PITB proj ects in clud ing some R&D proj ects should beini ti ated in a con sid ered man ner in all prov inces.Ex empt busi nesses from cor po rate in come tax for IT busi ness done within the coun try till 2020.Levy duty on im ported soft ware.Tax re lief to busi ness units on amounts spent on soft ware ap pli ca tions and re lated equip ment.Soft & eas ier terms to IT com pa nies for rais ing credit from banks.Lower the thresh old level for float ing IT com pa nies on the lo cal stock mar ket.Strict com pli ance of the use of li cense soft ware so that Paki stan is seen as a re spon si ble IT coun try.



Edu ca tionEx ist ing Sce nario

Paki stan is spend ing 2.1% of its GDP on edu ca tion against the UNESCO- recommended norm of a mini mum of 4%as com pared to the spent by In dia 3.3%, Viet nam 5.35%, Iran 5.2%, Ma lay sia 4.7% and In do ne sia 3.5%.

Com pari son of Pub li c Sec tor Spend ing on Edu ca tionCoun try Pub li c Sec tor Spend ing

(As % GDP)Lit er acy rate

in (%)Bang la desh 2.6 55.0

China — 93.7In dia 3.3 —

In do ne sia 3.5 —Iran 5.2 —

Ma lay sia 4.7 92.1Ne pal 3.2 57.9

Paki stan 2.1 57.0Sri Lanka — 90.6Thai land 4.5 —Viet nam 5.3 92.5

– : Note avail able Source: World Bank, UNDP, UNESCO, FBS, Min is try of Edu ca tionFig ures for lat est avail able year

The gov ern ment has de cided to dou ble the edu ca tion budget (as per cent age of GDP) as visu al ized in Fis calRe spon si bil ity and Debt Limi ta tion (FRDL) Act, 2005. This means an ex tra spend ing of 1.8 per cent of GDP over andabove the ex ist ing fund ing will be on hand dur ing the next five years.

The over all lit er acy rate (10 years & above) was 45 per cent in 2001, which has in creased to 55 per cent in 2006-07,in di cat ing a 10 per cent age points in crease over pe ri od of only six years.

Na tional Text book and Learn ing Ma te ri als Pol icy (2007) has been pre pared to sup port the qual ity of edu ca tion at alllev els through bet ter qual ity text books at af ford able prices and other learn ing ma te ri als for pro mot ing Paki stan asknowl edge based so ci ety.

In view of spread ing higher edu ca tion to every area of Paki stan, over the past three years, 17 new uni ver si ties havebeen granted Char ters, with the ma jor ity opened in ar eas where higher edu ca tion op por tu ni ties were pre vi ouslyun avail able.

To pro mote re search and de vel op ment (R&D) ac tivi ties, Higher Edu ca tion Com mis sion (HEC) has awarded 5,837PhD schol ar ships (3,237 in dige nous, 2,600 for eign) over the past three years.



Is suesThe budget al lo ca tion for edu ca tion in our coun try has al ways been viewed on the lower side. An amount of Rs. 24.6bil lion has been ear marked for edu ca tion in the cur rent fed eral budget 2008-09, which is 1.22% of the to tal budgetout lay and 4.47% of the to tal de vel op ment ex pen di ture in the cur rent budget, which is less than lat year’s budgetal lo ca tion for edu ca tion. Last year an amount of Rs. 24.28 bil lion was al lo cated for edu ca tion rep re sent ing 1.24%and 5.29% of the to tal fed eral budget ex pen di ture and to tal de vel op ment ex pen di ture re spec tively.

Out of 2.4% only 1.93% of GNP is be ing spent on edu ca tion in real terms and only 11% of the to tal edu ca tion budgetis al lo cated for the higher edu ca tion sec tor.

De vel op ment proj ects are planned and docu mented prop erly by high light ing that gov ern ment is very muchen thu si as tic to pro mote edu ca tion in the coun try. How ever, last year the gov ern ment had en vis aged im ple ment ing104 de vel op ment proj ects; al though it had failed to spend even a sin gle Ru pee on at least 39 proj ects by the end ofMarch 2008.

The ma jor ity of the popu la tion of our coun try Paki stan lives in ru ral ar eas and as such there is a dire need to de velopedu ca tional in sti tu tions at ru ral ar eas. Only 158.8 th o u s a nd schools are not enough to make ac cess to edu ca tionpos si ble for eve ry one.

Al though gov ern ment pro vides free edu ca tion but the stan dard of edu ca tion is quite low which cre ates a bigdif fer ence among the pub li c and pri vate sec tor school ings. The dif fer ence is due to un der utili za tion of al lo catedfunds by gov ern ment in pub li c sec tor edu ca tion. It is es ti mated that 20% to 30% of funds re mains unu til ised.

Ac cord ing to plan ning, teach ers should be quali fied hav ing at least bache lors’ de gree. Paki stan has 41 pu pil teacherra tio at pre- primary level which is higher as com pared to other South Asian coun tries like Bang la desh 34, Ne pal 20and In dia also has 41.

In the last years, to tal 118 de vel op ment proj ects were in cluded in the an nual budget by edu ca tion di vi sion, how everout of these 33- development proj ects had been listed with out any al lo ca tion of fund.

Plan ning for proper physi cal in fra struc ture is in evi ta ble for suc cess ful achieve ment of planned edu ca tion. How ever,most of the schools in pub li c sec tor are still run ning with out ba sic fa cili ties like drink ing wa ter, lava to ries, elec tric ity,bound ary wall, and even sit ting area (build ing) etc de spite spend ing of mil lions of ru pees in the past dec ades.

There is a dire need to bring the non- functioning schools into func tions, which are ly ing idle since last many years.This is evi dent from sta tis tics that Sindh prov ince has larg est share of non- functional in sti tu tions.

There is huge fund ing pro vided in the Fed eral budget for es tab lish ment of ca det col leges in all over Paki stan butun der the budget of Edu ca tion Di vi sion. In last years, to tal 25 ca det col leges are in cluded in the list of de vel op mentproj ects to be im ple mented and to tal al lo ca tion for these proj ects is Rs. 910 mil lion. How ever, these ca det col legesca ter only the mid dle and up per mid dle classes and as such leav ing no bene fit to poor fami lies and women.

Po liti cal in flu ence is be lieved to in ter fere in the al lo ca tion of re sources to the dis tricts and schools and in re cruit ment.Train ing and post ing of teach ers and school ad min is tra tors are also not based on merit, which ob vi ously af fect thequal ity of edu ca tion.



Pro pos als

The budget for edu ca tion sec tor should be at a mini mum 6% of the GNP as rec om mended by UNESCO for un derde vel oped coun tries with at least one- third of it should be al lo cated to the higher edu ca tion sec tor.

At least 10% of Edu ca tion Sec tor’s budget must be spent on ba sic lit er acy pro grams. The im pact of in fla tion shouldalso be taken into ac count while con sid er ing the al lo ca tion of funds.

In view of ex ist ing dis pari ties, the de vel op ment proj ects of edu ca tion di vi sion must fo cus on edu ca tion in re mote andun der de vel oped ru ral ar eas, and the pri or ity should be given spe cially to girls’ edu ca tion.

The budget for es tab lish ment of ca det col leges should be seg re gated and sepa rately budg eted from edu ca tiondi vi sion.

The al lo ca tion of funds for de vel op ment proj ects in the last years Rs. 6.3 bil lion which was less than Rs. 6.5 bil lional lo cated in 2007-08. In view of the fact that edu ca tion sec tor is al ready un der funded, the gov ern ment must en surethat it does not get af fected due to the fi nan cial cri sis be ing faced by the gov ern ment in the re cent past.

Trained and skilled re sources for the edu ca tion sec tor are a need of time and also the cuts in the de vel op mentbudget should be re versed back.

Re mu nera tion of lit er acy teach ers should be im proved in or der to meet their re quire ment keep ing in view the pres entin fla tion ary con di tions pre vail ing in the coun try.

The pro vi sion of qual ity edu ca tion has al ways been over looked, which is af fected through rig or ous teach ers train ingand in ten sive moni tor ing of learn ing achieve ments of the stu dents.

There is a need to re duce the cur rent im bal ances of school fa cili ties ex ist ing at dif fer ent lev els in dif fer ent prov inces.

As a mat ter of prin ci ple and pol icy, any de vel op ment proj ects im ple mented di rectly by the Fed eral Gov ern ment in the prov inces must be aimed at bene fit ing the low in come and the un der privi leged group.

Edu ca tion should be given sec ond pri or ity af ter de fence budget al lo ca tion.

Pub li c Sec tor edu ca tional in sti tu tions be pro vided suf fi cient funds to en able them to op er ate their setup in a smoothman ner.

Pri vate Sec tor Uni ver si ties be en cour aged to teach courses not be ing taught hith erto in Pub li c Sec tor Uni ver si tiese.g. So lar en ergy, Ac tu ar ial Sci ences, Ad vanced ap pli ca tion ori ented R & D in sci en tific and tech nol ogy based ar eas.

A break through ap proach is the cry ing need. All research- oriented or gani za tions be merged in Pub li c sec torUni ver si ties to es tab lish a link be tween the World of Aca dem ics and ap pli ca tions in real life e.g. Paki stan Ag ri cul turalRe search In sti tute be merged with pub li c Sec tor Ag ri cul ture Uni ver si ties, PCSIR be merged with de part ments ofChem is try etc. A de tailed ex er cise in this re spect be un der taken.



Con struc tionEx ist ing Sce nario

The Con struc tion sec tor grew by 7.9% against 3.1% last year and a yearly tar get of 5.4%.

Paki stan has a short fall of 5.5 mil lion houses as of end June 2004. There is an an nual short fall of 270,000 hous ingunits at pres ent

Pro duc tion ca pac ity has dou bled from 8.9 mil lion tones to 17.6 mil lion tones dur ing the last 6 to 7 years while de mand in crease by 27% from 7.7 mil lion tones to 9.8 mil lion tones.

The to tal pro duc tion of ce ment was re corded at 9.3 mil lion tones dur ing last dec ade com pared to 8.1 mil lion toneslast year, show ing an in crease of 13.7%.

Paki stan of fers a grow ing mar ket for en gi neer ing & con struc tion in dus try. Paki stan spent US $ 120 mil lion on theim port of con struc tion & min ing ma chin ery in There was a sharp in crease in the im port of the said ma chin erythere af ter, which is re flec tive of marked im prove ment in con struc tion and min ing busi ness in Paki stan.

Is sues

The Con struc tion sec tor grew by 7.9% against 3.1% last year and a yearly tar get of 5.4%. The Gov ern ment hasan nounced vari ous meas ures to boost this sec tor in the Fed eral Budget. Hous ing and con struc tion has re spondedposi tively to the in cen tives in spite of higher in put prices. There is a lot of po ten tial for in vest ment in high ways sec toron BOT/BLT/BOO ba sis.

Paki stan has a short fall of 5.5 mil lion houses as of end June 2011. There is an an nual short fall of 270,000 hous ingunits at pres ent while the back log is in ad di tion. The Prime Min is ter has is sued a number of pol icy guide lines un der“HOUSING FOR ALL PROGRAM” for launch ing hous ing schemes for Gov ern ment em ploy ees & pro vi sion ofin fra struc ture to the hous ing de vel op ment schemes.

There is a lot of scope for im port ing lat est tech no logi cal ad vance ments / hi- tech build ing ma te ri als. Con struc tionequip ment & plants with the lat est prac tices adopted in the de vel oped Coun tries af ter var ied Re search &de vel op ment are badly needed to be adopted by Paki stan as well. Qual ity Con trol & Ma te ri als Test ing Labo ra to ries & Equip ment are need of the time. There is un lim ited scope for in vest ment in this sec tor.

There is a lot of scope in the Elec tri cal, HVACR & Me chani cal Sec tor that is man da tory for the con struc tion in dus tryto day.

The new Home Fi nanc ing Schemes by lo cal and for eign Leas ing and Fi nan cial In sti tu tions are one of the mainrea sons of growth in this sec tor. There have been nu mer ous in fra struc ture proj ects completed and some areun der plan ning which in clude sev eral dams, high ways, motor ways, un der passes, flyo vers, in ter changes, mono rails(Ka ra chi Mass Tran sit Pro ject), Ga wa dar Deep Sea Port & Town ship (Mega Port City) Pro ject etc, which have leadthis in dus try to re gain its past status and glory.



Pro pos als

Govt. should start ur gently nu mer ous in fra struc ture de vel op ment proj ects, which in clude:

Sev eral dams;

High ways;

Motor ways;

Un der passes;

Flyo vers;

In ter changes;

Mono rails (Ka ra chi Mass Tran sit Pro ject);

Ga wa dar Deep Sea Port & Town ship (Mega Port City) Pro ject etc, which have lead this in dus try to re gain its paststatus and glory.

A com pre hen sive net work of rail con nec tion;

Clos ing in ef fec tive/non prof it able air ports;

Es tab lish ing air ports in such a way that they should fa cili tate two to three close by cit ies;

De velop road net works within coun try simi lar to that of Motor ways;

Ef forts to im prove within city road in fra struc ture to en sure fast move ment/re duce dis tances;

Con struc tion of un der passes/flyo vers;

Im ple men ta tion of Ka ra chi Mass Tran sit Pro ject;

Es tab lish ing Dry/Sea ports;

Con struc tion of Dams.



Ho tel & Tour ism


Tour ism and Ho tel In dus try has been de clared as an In dus try by the past Re gimes and Min is try of In dus tries andPro duc tion has al ready cir cu lated that in dus trial status has been al lowed to the Ho tel In dus try.

FBR has to is sue an SRO for its im ple men ta tion thereby con ces sions un der ‘I ndu strial Status’ could be ac corded tothis in dus try. Con sid er ing the for eign ex change gen er ated by ho tel in dus try it should be given Status ‘A’ as againstpre vail ing Ex port Status ‘C’ in con for mity with other Ex port ers.

Is sues

Air port authori ties hav ing in ter na tional flights are not hav ing Tour ist In for ma tion Count ers at air ports so that vi talin for ma tion could be pro vided for ho tel ac com mo da tion, tour ist vis it ing places and simi lar other use ful in for ma tion tothe In ter na tional trav el ers and tour ists ar riv ing from other coun tries to Paki stan. The said coun ters may have hot linefa cili ties with the ho tels of re pute and all trav el ers ar riv ing may be able to di rectly ar range ac com mo da tion of theirchoice, from the said coun ter.

Pro pos als

3 days Visa on ar ri val may be in tro duced and Ho tel and Tour ism in dus try may be en cour aged to de velop pack agesto at tract pas sen gers in tran sit to avail ar ri val Visa fa cil ity;

The taxa tion on ho tel in dus try should be re struc tured in a man ner that all the ap pli ca ble in di rect taxes be clubbedto gether into one tax, and re cov ered from the ho tels and res tau rants by one agency;

The col lected tax may be re- allocated in ter nally to dif fer ent head of ac counts or de part ments by the col lect ingagency con cerned;

Build ing road in fra struc ture to reach to po ten tial tour ist places es pe cially north ern part of the coun try;

Im prove ment of fa cili ties and more ex ten sive role of PTDC through out the coun try.



Bank ingEx ist ing Sce narioAt pres ent there are 41 sched uled banks, 6 DFIs, and 2 MFBs op er at ing in Paki stan whose ac tivi ties are regu lated andsu per vised by the State Bank of Paki stan. The com mer cial banks com prise of 3 na tion al ized banks, 3 pri vat ized banks,15 pri vate sec tor banks, 14 for eign banks, 2 pro vin cial sched uled banks, and 4 spe cial ized banks.

Is suesBusi ness com mu nity and small scale in dus trial sec tor are fac ing nu mer ous prob lems and dif fi cul ties while deal ingwith com mer cial banks in the coun try. A few of them are given be low. It is nec es sary that cor rec tive meas ures should be taken with the con sul ta tion and in volve ment of all the play ers es pe cially Cham ber of Com merce &In dus tries of the coun try for their early reso lu tion.

High mark up rates. Markup rates have in creased con sid era bly. Pre sent rates are 4% above KIBOR i.e. 14% apex.High markup rates have in creased the cost of do ing busi ness.

Non- availability of fi nance to SMEs. Usu ally SMEs find dif fi cul ties in ob tain ing cred its on soft terms from com mer cialbanks. Terms & con di tions are strin gent. The bor row ers are usu ally il lit er ates, less edu cated and do not have re sources as such can not meet the banks re quire ments. Pro ce dures and docu men ta tion have to be sim pli fied.Terms and con di tions for ob tain ing fi nances on soft terms should be sim pli fied to pa tron ize and en cour age SMEsec tor. Small and Me dium En ter prises are the back bone of our in dus try. Its growth is very es sen tial. It cre ates andpro vides jobs and help in al le vi at ing pov erty and rais ing the liv ing stan dards in the coun try. As such every ef fortshould be made to make them vi able and sus tain able.

The range and choice of prod ucts avail able & of fered by the com mer cial banks is lim ited. Rates of Re turn / Prof its onDe pos its are so low and un at trac tive that very lim ited op tions are avail able to the de posi tors. They do not match thecur rent rate of in fla tion. Op por tu ni ties and win dows in the banks to place Short Term sur plus funds by the busi nesscom mu nity are very scarce and lim ited. Both the banks as well as busi ness men are de prived of bene fits of ShortTerm De pos its due to poor and un at trac tive profit rates.

Con sumer Fi nances are now be ing dis cour aged. It is be ing argued by the banks that due to in crease of non- performing fi nances they are be ing com pelled to re duce Con sumer Fi nanc ing.

On Line serv ices of fered by the banks are in ef fi cient. Lot of time is wasted in get ting funds trans ferred On Line fromone Bank to another bank within same city and also In ter city. Usu ally the banks to PTCL lines at trib ute Link Downsand Non Con nec tivity and poor in fra struc ture.

On Line en cash ment of cheques are de layed due to one rea son or the other. In a large number of cases pro ceeds of cheques are re al ized next day thus the very pur pose of im me di ate re ali za tion/en cash ment is frus trated. Rea sonsgiven are “Link Downs” and No Con nec tivity. These are due to faulty and in ef fi cient sys tems op er at ing / in stalled inbanks. Banks should up grade their sys tems and pay at ten tions by in vest ing to im prove the pres ent in fra struc turesand hard ware/soft ware.

ATMs in stalled in banks branches are fre quently found “Out of Or der” or short of Cash.



Pro pos als

It is pro posed that a mecha nism should be laid down in the rules whereby banks may ver ify the ac tual na ture ofre mit tance and no duty is de ducted ex cept in cases where the re mit tance is in the na ture of roy alty / tech ni cal orfran chise fee.

Duty on du ti able serv ices es pe cially for bank ing sec tor, which in volve pub li c money, may only pay able to the statewhen the same is re cov ered by the tax payer

High mark up rates should be re duced be cause it may in crease the cost of do ing busi ness.

Pro vide fi nance to SMEs in sim ple terms Pro ce dures and docu men ta tion have to be sim pli fied. Terms andcon di tions for ob tain ing fi nances on soft terms should be sim pli fied to pa tron ize and en cour age SME sec tor.

Rates of Re turn / Prof its on De pos its should match the cur rent rate of in fla tion.

Con sumer Fi nances be en cour aged.

On Line serv ices of fered by the banks should be im proved, to save time of consumers.

Banks should up grade their sys tems and pay at ten tion by in vest ing to im prove the pres ent in fra struc tures andhard ware/soft ware.

ATMs in stalled in banks branches should be constantly checked by banks to keep them workable 24 hours a day.

Fi nanc ing Rates may be re vised and should be equal to Ex port Re fi nance rates.

Pro vi sion in For eign Ex change Man ual re gard ing Pay ment for serv ices and Mar ket ing re search, con sul tancy onsub mis sion of in voice or con tract, abroad re quired.

Abol ish ing of EDS de ducted by the Banks on Ex port Pro ceeds @ .25%.

There should be no Mini mum bal ance limit/ con di tion for main tain ing any kind of bank ac count to en cour age thedocu men tary econ omy. Cheque Books should be avail able free of cost.

Cash with drawal limit ex emp tion to be en hanced to Rs.100, 000/- in one day un der sec tion 231/a.



Capi tal Mar kets

In an ef fort to im prove vol umes and pro vide di rec tion to the capi tal mar kets, the ICMAP suggests to bring reasonablechanges in the ex ist ing regu la tory re gime, especially in Capi tal Gains Tax (CGT) with par ticu lar em pha sis on the need to pro vide re lief to the re tail seg ment. There should be ex emp tion from the fil ing of CGT re turns for small in ves tors within vest ment port fo lios of less than PKR 10mn. Re tail in ves tors had shied away from eq uity mar ket due to strin gentre port ing re quire ments that were aimed at in ves ti gat ing and docu ment ing sources of funds.

The CGT should be com puted by an in sti tu tion, such as the NCCPL on a trans ac tion ba sis and de duc tion made atsource. This de duc tion should be con sid ered as the full and fi nal tax li abil ity of the in ves tor. The KSE has alsorec om mended an am nesty that will al low in ves tors to re vise their in come tax re turns for the last five years at a lower taxrate. This would not only pro vide much needed li quid ity to the mar ket but also of fer dual bene fits for the gov ern ment. The pro posal will re sult in a one off in crease in reve nue for the gov ern ment while in creas ing docu men ta tion and the tax baseat the same time as pre vi ously un de clared sources of in comes are brought in to the tax net.

IPOs – few and far be tween

There is need to en cour age IPOs by pro pos ing tax con ces sions for com pa nies pur su ing list ing. These con ces sionsin clude ex emp tions from all capi tal mar ket re lated taxes for a pe ri od of five years from the list ing date and an in crease intax credit. News flows in di cate that FBR has agreed to a pro posal by the SECP that will in crease the tax credit from thecur rent 5% to 10% for a pe ri od of three years on en list ment of new com pa nies. While the number of pub li c of fer ings wentup to six dur ing CY10 from four last year, they still re main very low com pared to four teen and ten in CY07 & 08re spec tively.

CGT and the KSE100

Fol low ing the im po si tion of CGT in the budget for FY11, vol umes for the KSE100 tum bled down by 33% MoM to 52mn inJul10. Vol umes have re mained sub dued since then as re tail par tici pa tion has failed to re cover with Oct10 and Jan11be ing the only months where vol umes av er aged above 100mn. YTD vol umes av er age at 78mn com pared to 118mn inthe cor re spond ing pe ri od of last year. If im ple mented, the pro pos als put for ward will be the cata lyst needed to re vi tal izeour capi tal mar kets. While we be lieve that a well docu mented econ omy is es sen tial, im ple men ta tion of CGT should beun der taken in phases which will al low in ves tors to adapt to the new regu la tion with mini mal im pact on the mar ket.



Ag ri cul tureEx ist ing Sce nario

De spite lim ited re sources, the per form ance of ag ri cul ture sec tor of Paki stan is im pres sive as the coun try emerged as one of the top ex porter of ag ri cul tural prod ucts in the world.

Paki stan re mained the third larg est ex porter of rice and fifth larg est of cot ton while it was the 5th larg est pro ducer ofmilk in the world.

Paki stan is self- sufficient in sug ar cane whereas wheat pro duc tion has in creased ten times, which now stands at 24mil lion ton nes.

A lot of op por tu ni ties still ex isted in the ag ri cul ture sec tor and the Ha lal food mar ket, pri mar ily for Paki stanis liv ingabroad, was a big sec tor, which needed in vest ment.

Ag ri cul ture ac counts for about 21.2% of GDP and em ploys about 43% of the la bor force. Most ag ri cul tural prov ince is Pun jab where wheat and cot ton are the most grown.

The most im por tant crops are wheat, sug ar cane, cot ton, and rice, which to gether ac count for more than 75% of thevalue of to tal crop out put.

Paki stan's larg est food crop is wheat. In 2005, Paki stan pro duced 21,591,400 met ric tons of wheat, more than all ofAf rica (20,304,585 met ric tons) and nearly as much as all of South Amer ica (24,557,784 met ric tons). The coun try isex pected to har vest 25 to 23 mil lion tons of wheat in 2012.

The live stock sec tor con trib utes about half of the value added in the ag ri cul ture sec tor, amount ing to nearly 11 percent of Paki stan's GDP, which is more than the crop sec tor.

Is sues

Poor qual ity of seeds.

Lack of re search for in tro duc ing new seeds for higher out put and hav ing re sis tance against crop diseases.

Maxi mum bene fit to the in ter me di ary as the grower de pends on them.

No check and bal ance on mar ket prices to save the peas ants and pro vide them maxi mum bene fits of theGov ern ment poli cies i.e fixa tion of mar ket prices of cot ton, sug ar cane, wheat, rice etc.

The pes ti cides pro vided to the peas ants are of poor qual ity and also very ex pen sive.

A large portion of water that could be utilized for agricultural purposes, is lost and makes way towards the sea due towater mismanagement



Pro pos als

Gov ern ments have to take the se ri ous con cen tra tion to wards the de vel op ment of ag ri cul ture sec tor. This sec torcom pris ing the back bone of the econ omy.

Paki stan has enor mous po ten tial to sig nifi cantly in crease its ag ri cul tural pro duce but the grown is be ing hin dered byin suf fi cient and out dated farm ing and pro duc tion tech niques, in ef fec tive use of land and wa ter re sources , poorhy giene and low food stan dards. How ever a lot can be achieved by im prov ing pro duc tiv ity ,en sur ing safety andef fi ciency in food proc ess ing ,ef fi cient live stock’s man age ment and em ploy ing new post har vest tech nolo gies

Paki stan needs more res er voirs for wa ter as the gla ciers were melt ing at a rapid pace due to cli mate changes asmost of Paki stan ag ri cul ture sec tor de pended on re served wa ter and very lit tle on rain water.

Value ad di tion in ag ri cul ture sec tor has been ne glected and a lot of money is be ing spent on re search. The pri vatecom pa nies should be en cour aged to take care of the sec tor while the gov ern ment’s role should be of the su per vi sorand fa cili ta tor.

Re- map the stra te gic Plan to pro mote the ag ri cul ture sec tor.

Pro vide the in ter est free bear ing loans to the farm ers to re- build the cul ti vated ar eas.

Make aware ness pro grams to cope- up the chal lenges and un- certainties.

Make Stra te gic col la tion be tween Pri vate land own ers and gov ern ment ag ri cul ture sec tor

De vel op ing skills and ca pa bili ties of hu man re sources and ca pac ity build ing of the aca de mia to un der take re searchand de vel op ment in the ag ri cul ture sec tor is es sen tial for the long term growth of the sec tor.

There are al ready few so phis ti cated agri- businesses in volved in the dairy and food- proc ess ing sec tor, which serveas an ex am ple of the enor mous po ten tial in this sec tor.

Gov ern ment must ensure proper utili za tion of food com modi ties (Fin ished/Semi fin ished) to re duce the wastagesand main tain ing its food quali ties for long time pe ri od.



TaxationIncome Tax:

Ex ist ing Situa tion Pro posed Change Ra tional for ChangeSec tion 59B(2)(b):“A com pany within the group en gaged in the busi ness of trad ing shall not been ti tled to avail group re lief”

Sec tion 59B(2)(b) to read:“A com pany (not be ing a com panyop er at ing trad ing houses as de fined un derclause 57 of Part IV of the 2nd Sched ule of the Or di nance) en gaged in the busi ness oftrad ing shall not be en ti tled to sur ren derthe loss”Ex pla na tion:for the pur pose of this para graph, acom pany would not be con sid ered to been gaged in the busi ness of trad ing un lessmore than 30 per cent of de clared turn overis from busi ness of trad ing. Pro vided thatlosses on specu la tion busi ness as de finedun der Sec tion 19(2) the Or di nance will notbe avail able for sur ren der.

To make the le gal pro vi sions con sis tentwith spirit of the con cept and un der ly ing un der stand ing of the Task force formedfor this pur pose. Moreo ver trad ingac tiv ity up to the ex tent of 30 per cent ofthe turn over is pro posed not todis qual ify the claim. As a Large Trad ingHouse en tails a sig nifi cant in vest mentand cre ates real jobs in the econ omy, itis pro posed to make it eli gi ble tosur ren der its losses.

Sec tion 59B To be in serted af ter Sec tion 59B:Ex pla na tion:The amend ment in this Sec tion by theFi nance Act 2010 shall be deemed al waysto have been en acted and shall have ef fect ac cord ingly.

In or der to make the amend mentsap pli ca ble for pend ing cases.

Sec tion 151 (read with Di vi sion 1 of PartIII of First Sched ule) of In come TaxOr di nance, 2001, with hold ing tax @ 10% is re quired to be de ducted on pay mentof profit on debt which is ad just ableagainst fi nal tax.

With hold ing tax on pay ment of profit ondebt within Group Com pa nies (be tweenHold ing and Sub sidi ary Com pa nies andbe tween two Sub sidi ary Com pa nies)should be ex empted.

To re move dif fi cul ties in im ple ment ingthe Hold ing Com pany Con cept

The in sur ance com pa nies have beencon test ing that their re ceipt on ac countof pre mium do not fall in the am bit of“turn over” and there fore they are notli able to mini mum tax on turn over.

It is pro posed that a clause shall bein serted un der sec tion 113(3) to spe cifi cally ex clude in sur ance pre mium from thedefi ni tion of turn over.Al ter na tively, turn over for in sur ancecom pa nies should be taken as re duced bythe re- insurance pre mium by in cor po rat ingap pro pri ate amend ment in Part III ofSec ond Sched ule.

This will help to avoid un nec es saryliti ga tion of cases and sup portin sur ance in dus try



63. Con tri bu tion to an Ap proved Pen sion Fund.— (1) An eli gi ble per son asde fined in sub- section (19A) of sec tion 2de riv ing in come charge able to tax un derthe head Sal ary or the head In come from Busi ness shall be en ti tled to a tax creditfor a tax year in re spect of anycon tri bu tion or pre mium paid in the yearby the per son in ap proved pen sion fundun der the Vol un tary Pen sion Sys temRules, 2005.

Tax re bate u/s 63: Life In sur ance Pre miumbe added to the list of eli gi ble in vest mentand the in vest ment cor ri dor be in creased to 20% of tax able in come or Rs.500,000which ever is lower.

Sup port Life In sur ance busi ness andpro vide bene fits to pol icy hold ers.

In some cases of as sess ment, taxde part ment plead that of the ma tur ityamount over and above paid to pol icyhold ers shall be treated as profit on debtand in voked pro vi sion of sec tion 151.

An ex pla na tion be in serted at the end ofsub- section (1) of sec tion 151 pro vid ingthat the pro vi sions of this sec tion shall notap ply to in sur ance com pa nies mak ingpay ment to a pol icy holder at the time ofma tur ity of in sur ance pol icy.

Sup port Life In sur ance busi ness andpro vide bene fits to pol icy hold ers.

Seventh Schedule

Pro vi sions for Ad vances and offBal ance Sheet items: [Rule 1(c) ]Pro vi sions for ad vances and off bal ancesheet items shall be al lowed upto amaxi mum of 1% of to tal ad vances; 2[andpro vi sions for ad vances and off bal ancesheet items shall be al lowed at 5% ofto tal ad vances for con sum ers and smalland me dium en ter prises (SMEs) (asde fined un der the State Bank Pru den tialRegu la tions)] pro vided a cer tifi cate fromthe ex ter nal audi tor is fur nished by thebank ing com pany to the ef fect that suchpro vi sions are based upon and are in line with the Pru den tial Regu la tions.

Pro vi sion ing in ex cess of 1% would beal lowed to be car ried over to suc ceed ingyears:

Pro vided that if pro vi sion ing is less than1% of the ad vances, then ac tualpro vi sion ing for the year shall beal lowed.]

(1) Pro vi sions for ad vances other thancon sumer and SMEsPro pos als of ear lier sub mit ted by vari ousas so cia tions was not prop erly en ter tainedby the Gov ern ment and again it isre stricted upto 1% of ad vances merelyex clu sion of con sumer and SMEs isin suf fi cient.Fur ther more, FBR in most casesmis in ter pret ing the word of “to talad vances” as “net ad vances” which is un- justified. It is sug gested to is sue aclari fi ca tion in this re spect to in ter pret “to tal ad vances” as “gross ad vances” shown inthe Bal ance sheet.(2) Pro vi sions for Con sumer and Small& Me dium En ter prises’ (SME) ad vancesThe pro vi sions for ad vances and off- balance sheet items will be al lowed at 5per cent of to tal ad vances for Con sum ersand SMEs (as de fined un der the StateBank Pru den tial Regu la tions).How ever, it is not pro vided as to how thepro vi sion for ad vances and off Bal ancesheet items re lat ing to Con sumer/SMEsshall be car ried over if it ex ceeds thepro vided limit of 5%. It is there foresug gested to amend the pro vi sionac cord ingly.

This will help to avoid un nec es saryliti ga tion of cases and sup port Bank ingIn dus try



Treat ment of sub stan dard debts [Rule1(d)]The amount of bad debts clas si fied assub- standard un der the Pru den tialRegu la tions is sued by the State Bank ofPaki stan shall not be al lowed asex pense.]

(3) Treat ment of sub stan dard debtsThe amount of bad debts clas si fied assub stan dard un der the Pru den tialRegu la tions will not be al lowed asex pense, how ever, if the same isre clas si fied by the Bank ing Com panyun der the Pru den tial Regu la tions as“doubt ful” or “loss”, the same will beal lowed in the above man ner. It ispro posed that “Sub stan dard” class shallalso be al lowed in the same man ner as it is a tim ing dif fer ence only.


Tran si tory Pro vi sions for bad &doubt ful debts: [Rule 8(A)](1) Prior years’ pro vi sions Amountspro vided for in the tax year 2008 andprior to the that for or againstir re cov er able or doubt ful ad vances,which were nei ther claimed nor al lowedas a tax de ducti ble in any tax year, shallbe al lowed in the tax year in which suchad vances are ac tu ally writ ten off againstsuch pro vi sions, in ac cor dance with thepro vi sions of sec tions 29 and 29A.

(2) Write back of past pro vi sions Amounts pro vided for in the tax year2008 and prior to the that for or againstir re cov er able or doubt ful ad vances,which were nei ther claimed nor al lowedas a tax de ducti ble in any tax year,which are writ ten back in the tax year2009 and there af ter in any tax year andcred ited to the Profit and Loss Ac count,shall be ex cluded in com put ing the to talin come of that tax year.

Tran si tory Pro vi sions for bad & doubt ful debts: [Rule 8(A)]The afore said pro vi sion is not hap pilyworded and pro vides room formis in ter pre ta tion, al ready faced by cer tainbanks in their re cent tax as sess mentswhen the tax authori ties have tried toin ter pret the terms “nei ther claimed noral lowed”in a very re stric tive and im prac ti ca bleman ner. Also, the ref er ence to sec tion 29Ais mis placed as the same is no moreap pli ca ble to Bank ing Com pa nies.

Rule 8A(2) safe guards against dou bletaxa tion of amounts re lat ing to pro vi sionsfor bad debts, nei ther claimed nor al lowed,when the same are writ ten back later inac counts. The tax de part mentmis in ter pret ing rule 8A(2) and has added in some cases the amount writ ten off againstpro vi sions though the same was notclaimed ear lier.

This will help to avoid un nec es saryliti ga tion of cases and sup port Bank ingIndustry


Tax de duc tion on Bank ingtrans ac tions Sec tion 231A & 231AA

231A. Cash with drawal from a bank. —

(1) Every bank ing com pany shall de ducttax at the rate speci fied in Di vi sion VI ofPart IV of the First Sched ule, if thepay ment for cash with drawal, or the sum to tal of the pay ments for cash with drawal in a day, ex ceeds twenty- five th o u s a ndru pees.

The above pro vi sion is con tra dic tory to thegov ern ment’s aim to docu ment theecon omy, it will en cour age bank ingcus tom ers to use in for mal chan nels fortheir trans ac tions. There fore it is sug gested to re view the im po si tion of tax on bank ingtrans ac tions in line with the long termob jec tives.

It will dis cour age bank ing cus tom ers touse in for mal chan nels for theirtrans ac tions.



(2) Ad vance tax un der this sec tion shallnot be col lected in the case ofwith draw als made by,-

(a) the Fed eral Gov ern ment or aPro vin cial Gov ern ment; (b) a for eign dip lo mat or a dip lo maticmis sion in Paki stan; or(c) a per son who pro duces a cer tifi catefrom the Com mis sioner that his in comedur ing the tax year is ex empt.231AA. Ad vance tax on trans ac tions inbank.—

(1) Every bank ing com pany, non- banking fi nan cial in sti tu tion, ex changecom pany or any author ized dealer offor eign ex change shall col lect ad vancetax at the time of sale against cash ofany in stru ment, in clud ing De mand Draft,Pay Or der, CDR, STDR, SDR, RTC, orany other in stru ment of bearer na ture oron re ceipt of cash on can cel la tion of anyof these in stru ments:Pro vided that this sub sec tion shall notbe ap pli ca ble in case of inter- bank orintra- bank trans fer and also wherepay ment is made through a crossedcheque for pur chase of a fi nan cialin stru ment as re ferred to in sub- section(1).

(2) Every bank ing com pany, non- banking fi nan cial in sti tu tion, ex changecom pany or any author ized dealer offor eign ex change shall col lect ad vancetax at the time of trans fer of any sumagainst cash through on line trans fer,tele graphic trans fer, mail trans fer or anyother mode of elec tronic trans fer.

(3) The ad vance tax un der this sec tionshall be col lected at the rate speci fied inDi vi sion VIA of Part IV of the FirstSched ule, where the sum to tal ofpay ments for trans ac tions men tioned insub- section (1) or sub sec tion (2) as thecase may be, ex ceed twen ty fiveth o u s a nd ru pees in a day.

Fur ther more, it is sug gested to in creasethe thresh old from Rs. 25,000/- to Rs.50,000/-



(4) Ad vance tax un der this sec tion shallnot be col lected in the case oftrans ac tions made by,—(a) the Fed eral Gov ern ment or aPro vin cial Gov ern ment;(b) a for eign dip lo mat or a dip lo maticmis sion in Paki stan; or(c) a per son who pro duces a cer tifi catefrom the Com mis sioner that its in comedur ing the tax year is ex empt.

Hu man Re source Ca pac ity Build ing Ex ist ing Situa tion Pro posed Change Ra tional forChange

The WWPF & the WWF (to tal 7%) have failed to con trib uted to wardsim prov ing the qual ity of the hu man re source in the Coun try

Listed com pa nies are al lowed to spend up to50% of their un dis trib uted Work ers ProfitPar tici pa tion Fund (WPPF) con tri bu tion ontech ni cal train ing pro grams to en hance thequal ity of their hu man re source. Simi larly listed com pa nies are al lowed to spend50% of their con tri bu tions to the Work ersWel fare Fund (WWF).Al ter na tively the rate of WPFF & WWF bere duced by 50%

In dus try driven tech ni cal train ingpro grams will lead to the de vel op ment ofa hu man re source pool which is in linewith in dus try needs

Fed eral Ex cise DutyIn tro duc tion: Ex cise du ties are lev ied in or der to re duce the con sump tion of luxu ri ous items and this prin ci ple has beenvio lated in Paki stan since the in tro duc tion of such lev ies. Cur rently there is very high eva sion of taxes in sec tors whereboth ex cise and sales tax are levi able.

Ex cise Duty on Per sonal Care Prod ucts:

Brief Back ground: Cur rently there are many daily use per sonal care prod ucts such as Sham poos, Skin Creams etc.which are sub ject to ex cise duty at Re tail Price. In ad di tion sales tax is lev ied on these prod ucts on to tal value as well,which is in clu sive of fed eral ex cise duty. This re sults in mul ti plic ity of taxes and en cour ages tax eva sions and in flow ofsub stan dard smug gled goods; and sub se quent loss of reve nue to the Gov ern ment ex cheq uer.

Pro posal:

Ex cise duty on Sham poos and Cos metic items was origi nally im posed to dis cour age lux ury prod ucts. As these havenow be come es sen tial items for the Paki stani con sum ers, it is rec om mended that cur rent 10% rate of duty be re moved.This will en cour age fur ther in vest ment, drive higher con sump tion of lo cally manu fac tured goods and re strict in flow ofsmug gled & sub stan dard items. In the longer term, this will also en hance duty and tax con tri bu tion to the ex cheq uer.



Fed eral Ex cise on Roy alty and Fee for Tech ni cal Serv ices (Fran chise Fee) Pay ments

Brief Back ground: Sec tion 3 of the Fed eral Ex cise Act, 2005 de fines the scope of the levy of Fed eral Ex cise. TheSec tion lim its the ap pli ca tion of the Act to the fol low ing ac tivi ties:

Goods pro duced and manu fac tured in Paki stan;

Im port of goods into Paki stan ter ri tory;

Serv ice pro vided or ren dered in Paki stan.

Through the Fi nance Act, 2006 the Board in tro duced Rule 43 A to the Fed eral Ex cise Rule of 2005 whereby it ar bi trar ilylev ied ex cise duty on the pay ments of Roy alty and Tech ni cal Serv ices Fee. The pay ments are in the na ture of ex pensesfor lo cal com pa nies and hence mak ing them pay FED on such ex penses is un fair and ul tra to the main statue.

Pro posal:

This ar bi trar ily im posed Ex cise Duty should be im me di ate ly abol ished as:

o This levy will hin der the in flow of for eign in vest ment in the shape of know how and brands etc.

o Ex cise Duty on Roy alty and Tech ni cal serv ices fee is against the prin ci pal stat ute.

It is im pera tive to state that as per the gen eral in ter pre ta tion of stat ute, pay ment of Roy alty or Tech ni cal Fee can not betreated as serv ice. Any levy should not be re ceived from a per son who is in cur ring ex pen di ture and not earn ing anyin come. Re moval of FED on roy alty and tech ni cal serv ice fee will help for eign brands / com pa nies to en ter into Paki stanmar ket thereby in creas ing the in vest ments in Paki stan and will fur ther en cour age ex ist ing for eign com pa nies to in vestmore in Paki stan.

Spe cial Ex cise Duty

Brief Back ground: With ef fect from Tax Year 2008 Spe cial Ex cise Duty @1% is lev ied on all (with a few ex cep tions)lo cal and the im ported prod ucts.

Pro posal:

o The goods which are al ready sub ject to (nor mal) Fed eral Ex cise Duty should be ex empted from the levy of spe cialex cise duty;

o The goods which are sub ject to Sales Tax on the ba sis of re tail price should also be ex empted for the spe cial ex ciseduty.

The goods, which have al ready been sub ject to higher value and rate of tax/duty, are taxed again with the spe cial ex ciseduty then it will lead to in fla tion ary im pact on the econ omy and may also fuel un docu mented trade prac tices and dis tortthe over all com peti tive en vi ron ment.



Cus tom Duty

In tro duc tion: It has been seen over the past two dec ades that cus tom duty rates on raw ma te ri als, semi fin ished goodsand fin ished goods have been re duced due to the rea son be ing Paki stan a mem ber of WTO and in or der to avoid taxeva sion / avoid ance.

Now there is a strong need to re view the cus tom duty struc ture once again to fa cili tate the lo cal manu fac tur ing in dus trybe cause cur rent struc tures sup port the pro mo tion of trade in com modi ties rather than manu fac tur ing in dus try.

Re duc tion in Im port Cus toms Duty on Vari ous Raw/Pack ag ing Ma te ri als

Brief Back ground:

o Fil ter pa per used to make tea bags is im ported at 20% duty; whereas im port duty for fin ished goods tea bags is 10%

o Skimmed Milk Pow der (SMP) is a key raw ma te rial for ice cream pro duc tion. Cur rently there is a 25% duty on SMPwhilst the duty on fin ished prod uct (ice cream) is also 25%.

Pro posal:

We sug gest that the duty on raw ma te rial should be lower than the fin ished prod uct to en cour age lo cal manu fac tur ing.We rec om mend a duty of 10% on the above items im ported as raw ma te rial.

Bene fit: The above will help cre ate cost com peti tive en vi ron ment in the coun try and at tract more in vest ment inmanu fac tur ing sec tor.

Regu la tory Duty on Im ported items.

Brief Back ground: In August 27, 2008 the gov ern ment im posed the regu la tory duty within the range of 15% to 50% on350 items on im ported goods through SRO 1 of 2008. The ob jec tive of this duty was to col lect higher tax reve nue onlux ury items.

Pro posal:

The gov ern ment has also lev ied the regu la tory duty @ 15% on some of es sen tial items, which in clude:

a. Tooth paste.b. Sham poo.c. Soap and De ter gent

Please note that for the above items the FBR has al ready in creased the cus tom duty from 25% to 35% in the budget2008-09, re sult ing in cu mu la tive levy of 40% to 85%.

Rec om men da tion: The regu la tory duty should be with drawn from the above items in or der to pro vide the nec es sarygoods to the con sum ers with the re duce price.



General Proposals

1. Broad ning Tax Base:

In or der to broaden the de sired tax base, to mini mize the ave nues to evade tax, to cre ate a fairer so ci ety and togen er ate more em ploy ment op por tu ni ties fol low ing steps are sug gested:

i) Na tional Tax Num ber should be made man da tory for pur chase / sale / trans fer of im mov able prop erty (noex emp tion what so ever), Mo tor Ve hi cle, Club Mem ber ship, Credit Cards, Reg is tra tion with CDC andDis tri bu tion of Profit/Markup ex ceed ing statu tory tax able limit.

ii) Sub mis sion of quar terly state ments by the Reg is trars & Hous ing So cie ties for reg is tra tion / trans fer ofIm mov able Prop erty (In dus trial Com mer cial, Resi den tial & Ag ri cul tural) Mo tor Ve hi cle Reg is tra tion Authori ties, Clubs (Pri vate & Pub li c), Credit Card is su ing authori ties, Cen tral De posi tory Com pany and Fi nan cialIn sti tu tions dis trib ut ing profit more than statu tory tax able lim ited.

iii) The ex emp tion un der sec tion 111 (4) of the Or di nance to the for eign ex change brought into Paki stan throughproper bank ing chan nel should only be al lowed to those re mit tances which are in vested in the busi nessun der tak ing.

vi) The con cept of pre sump tive taxa tion be gradu ally re duced and only the real in come be taxed; be cause suchsys tem dis tort the en tire taxa tion sys tem and af fect the or gan ized sec tor ad versely. The taxes must beeq ui ta ble and fair be tween dif fer ent classes of so ci ety. All the seg ments of the so ci ety should be brought in thetax net.

Re duc tion in Tax Rate:

Cor po rate taxes are very high in Paki stan as com pare to other de vel op ing and de vel oped mar kets.

i) The rate of In come Tax for the cor po rate and non- corporate sec tors be re duced by 5%;

ii) The pres ent statu tory limit of ex emp tion un der the In come Tax law be in creased from Rs.100,000/-

These meas ures will not only pro mote in vest ment in Paki stan but also en cour age com pa nies and in ves tors to fur therbroaden their busi ness as their re turns will in crease which will ul ti mately bene fit the econ omy to be com peti tive with itsneigh bors and at the same time aug ment the share hold ers re turn.



Budget 2012-13 Boolet Title Cover · pro poor cons s af l sidhe n in o era tt i forth com ing...

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Transcript of Budget 2012-13 Boolet Title Cover · pro poor cons s af l sidhe n in o era tt i forth com ing...