November 20, 2019: The Federal Cabinet, in its meeting held on 19th November 2019, approved the first-ever National Tariff Policy (NTP). The Policy, developed by the Commerce Division after extensive consultation with the stakeholders, marks a milestone in the national economic policy paradigm by recognizing the importance of employing import tariff for industrial development and export growth.
Prime Minister Imran Khan, in his remarks during the Cabinet meeting, said that the import tariffs have been traditionally employed as a revenue generation tool, which has increased reliance on import tariffs for revenue collection.
In accordance with the reform agenda of the government, the economic policy paradigm is now being realigned to leverage tariffs for industrial development.
The National Tariff Policy aims at removing the anomalies in the tariff structure and making it a reflection of trade policy priorities and enhancement of competitiveness through duty-free access to imported raw materials and promotion of investment into efficient industries through a predictable tariff structure, decided through an institutional mechanism.
The NTP is based on the principles of (i) employing tariffs as an instrument of trade policy rather than revenue generation, (ii) maintaining vertical consistency through cascading tariff structures (increasing tariff with stages of processing of a product), (iii) providing time-bound ‘strategic protection’ to the domestic industry during the infancy phase, and (iv) promoting competitive import substitution through time-bound protection, which will be phased out to make the industry eventually competitive for export-oriented production.
The policy guidelines contained in the NTP, as approved by the Cabinet, provide that the tariff slabs will be simplified based on the principle of cascading; tariffs on raw materials, intermediate and capital goods will be gradually reduced; the additional customs duty and regulatory duties will be gradually reduced; the difference in the rates of tariff for the commercial importers and industrial users of raw materials, intermediate and capital goods will be eliminated to provide a level-playing field to the SMEs through competitive access to essential raw materials; the nascent industry will be provided time-bound protection, which will cover the payback period.
The policy will be implemented through a Tariff Policy Board (TPB) chaired by the Commerce Minister/Advisor, with Minister for Industries & Production, Secretary Finance, Secretary Revenue, Chairman FBR, Secretary Commerce, Secretary Board of Investment, and Chairman NTC as its members. A Tariff Policy Centre shall be created in the Ministry of Commerce, which will serve as the Secretariat of the TPB.
Abdul Razak Dawood, Commerce Advisor, stated that the NTP marks a watershed in the country’s economic policymaking since it would energize export growth, lead to rapid industrialization, and import substitution through predictability in tariff framework.