KARACHI: Salim Valimuhammad, Chairman of the Pakistan Chemicals & Dyes Merchants Association (PCDMA), has raised serious concerns about widespread misuse of the Export Facilitation Scheme (EFS), warning that the current loopholes in the system could lead to the collapse of small and medium enterprises(SMEs) while causing significant revenue losses to the national exchequer.
In a statement, the PCDMA chief urged Prime Minister Shehbaz Sharif and Federal Board of Revenue (FBR) Chairman to implement immediate corrective measures, emphasizing that raw materials imported under the duty-free scheme are being illegally diverted to the local market instead of being used for their intended export-oriented industrial purposes.
Valimuhammad pointed out that while the EFS was designed to allow export-oriented industries to import raw materials without sales tax to manufacture value-added products, the facility is being systematically abused. “The current practice of audits is inadequate. Why can’t we verify these transactions in real time?” he questioned.
He proposed concrete measures to curb the misuse of the scheme, including linking raw material imports to verified Export Letters of Credit (LCs) and establishing fixed percentage ratios to limit duty-free imports. Goods subject to high tariffs and tax escalations are prone to exploitation under the Export Facilitation Scheme (EFS). To prevent such revenue leakages, he suggested that the government reduce the duty structure, cautioning that failure to do so would perpetuate challenges in combating illicit trade activities.
“The ongoing abuse of EFS is creating a dual crisis – it’s not just draining government revenues but also distorting the entire industrial ecosystem,” Valimuhammad stated. “If immediate corrective actions aren’t taken, the scheme should be abolished altogether as it’s threatening legitimate businesses while failing to achieve its original objectives.”
“With proper regulations, EFS could be an excellent tool for export growth. However, in its current flawed implementation, it’s doing more harm than good to the national economy,” he concluded.
