Well you have no idea of Pakistani textile and also not about the financial management and pricing. Let me tell you the areas where you are factually wrong.
A few additions and corrections if i may:
- Pakistan do import cotton in some years and export in others. We have significant cotton production but import and export is based on local production and international prices. For example if its a drought in Pakistan so local production is low then we have to import and if its a bumper product and drought in India then we will export to India.
Not some years! Every year we export some cotton and also import. Its related to quality and type of cotton required. For example, we will import some PIMA and Egyptian cotton every year as there is a demand for that in export market. Similarly we export some of our own cotton, less in bale for now but more in yarn form.
Cotton is very small portion in overall supply chain. What do you think what will be the cost of cotton in overall sales value of final product? It can be more than 15% to 20% for branded items (like Levies manufacturing factories of Pakistan) and 30% to 50% in sales of finished goods to brands such as IKEA, rest of the cost pertains to machines, labor, administration, utilities, infrastructure and others.
Actually, this is true but not for the reason you gave. The raw material or yarn will make up around 65% to 80% of the total product cost depending on the product. For home textiles, bed sheets and towels it will be close to 80%. For garments it will be around 65% to 70% will go lower for high fashion products. However please note that cotton may be 50% to 60% of the overall cost of yarn because we are using loads on poly cotton blends. That then reduces the percentage of cotton material but raw material costs are 65% to 80% as explained above.
So while in case of devaluation of 50% of PKR our sales value in local currency will increase by 50% but you input will increase for imported material only which can be a small % of cotton and chemicals (may be between 10% to 30% considering a lot of cotton will still be local). Whereas your labor cost, depreciation, and infrastructure costs are constant whereas utilities cost got increased only marginally in comparison to increase in sales value.
True. If we impose 17% GST and update the dollar conversion rate to current one in a costing we did in May, there is no difference in price keeping everything else as constant. I checked it yesterday to evaluate where we are standing right now.
On overall basis, the exporter will get a lot of benefit in increasing the export sales.
Not benefit really but there wont be much damage either. The only problem that the businessmen are actualyl worried about it loss/blockage of capital. Since they will be paying GST at time of purchase and the refund usually get delayed by 6 to 8 months that will mean that 17% of capital is blocked for 7 to 8 months which is huge. So again as i said earlier, if gov can somehow improve the process of refund we are all good.
By the way this whole drama was a fake news by the newspaper. APTMA has already declined any call for strike or unit shut down.
True. Market update is that the mills are running as of today.
Good to know that. When writing feel free to discuss any tax related query as it is my domain of expertise.
Perfect, i will keep that in mind bro!
Aap ki kapray wali mil hai
Nahi bahi, millon wala ni hoon mein!!
